<PAGE>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
Commission file number 1-6841
SUN COMPANY, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1743282
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
TEN PENN CENTER, 1801 MARKET STREET, PHILADELPHIA, PA 19103-1699
----------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 977-3000
----------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
At June 30, 1996, there were 73,967,597 shares of Common Stock, $1 par
value and 12,500,000 shares of Cumulative Preference Stock--Series A, no
par value, outstanding.
<PAGE>
<PAGE> 2
SUN COMPANY, INC.
-----------------
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Six Months Ended June 30, 1996
and 1995 3
Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1996
and 1995 4
Condensed Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30,
1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security
Holders 25
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURE 27
<PAGE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
------------------
1996 1995*
---- ----
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $787 in 1996 and $961 in 1995) $5,346 $5,057
Interest income 8 4
Other income 21 15
------ ------
5,375 5,076
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 4,083 3,586
Selling, general and administrative expenses 285 335
Taxes, other than income taxes 832 1,011
Depreciation, depletion and amortization 132 131
Provision for write-down of assets and other
matters (Note 4) 85 93
Interest cost and debt expense 40 55
Interest capitalized (1) (2)
------ ------
5,456 5,209
------ ------
Loss from continuing operations before
credit for income taxes and cumulative
effect of change in accounting principle (81) (133)
Credit for income taxes (35) (54)
------ ------
Loss from continuing operations before cumulative
effect of change in accounting principle (46) (79)
Income from discontinued operations (Note 2) 38 210
Cumulative effect of change in accounting
principle (Note 5) -- (87)
------ ------
NET INCOME (LOSS) (8) 44
Dividends on preference stock (22) --
------ ------
Net income (loss) attributable to common stock $ (30) $ 44
====== ======
Income (loss) per share of common stock:**
Loss from continuing operations before cumulative
effect of change in accounting principle $(.92) $(.74)
Income from discontinued operations .51 1.96
Cumulative effect of change in accounting principle -- (.81)
----- -----
Net income (loss) $(.41) $ .41
===== =====
Cash dividends paid per share:
Preference stock*** $1.80 $ --
Common stock $.50 $.90
</TABLE>
- -------------
*Restated to reflect the change in method of accounting for the
impairment of long-lived assets, effective January 1, 1995 (Note 5) and
to treat international production and Canadian upstream petroleum
operations as discontinued operations (Note 2).
**Represents both primary and fully diluted income (loss) per share
(Note 6). Based on the weighted average number of common shares
outstanding (in millions) of 74.0 in 1996 and 107.1 in 1995.
***Each share of preference stock is represented by two depositary shares.
Each depositary share accrues dividends quarterly at a rate of $.45 per
share, or one-half the rate paid on the preference stock.
(See Accompanying Notes)
<PAGE>
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months
Ended June 30
--------------------
1996 1995*
------ ------
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $419 in 1996 and $476 in 1995) $2,886 $2,580
Interest income 4 3
Other income 13 11
------ ------
2,903 2,594
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 2,180 1,817
Selling, general and administrative expenses 151 165
Taxes, other than income taxes 442 500
Depreciation, depletion and amortization 66 64
Provision for write-down of assets and other
matters (Note 4) 85 93
Interest cost and debt expense 20 28
Interest capitalized (1) (1)
------ ------
2,943 2,666
------ ------
Loss from continuing operations before
credit for income taxes (40) (72)
Credit for income taxes (18) (29)
------ ------
Loss from continuing operations (22) (43)
Income from discontinued operations (Note 2) 19 181
------ ------
NET INCOME (LOSS) (3) 138
Dividends on preference stock (11) --
------ ------
Net income (loss) attributable to common stock $ (14) $ 138
====== ======
Income (loss) per share of common stock:**
Loss from continuing operations $(.45) $(.40)
Income from discontinued operations .26 1.69
----- ------
Net income (loss) $(.19) $1.29
===== =====
Cash dividends paid per share:
Preference stock*** $.90 $ --
Common stock $.25 $.45
</TABLE>
- -------------
*Restated to reflect the change in method of accounting for the
impairment of long-lived assets, effective January 1, 1995 (Note 5) and
to treat international production and Canadian upstream petroleum
operations as discontinued operations (Note 2).
**Represents both primary and fully diluted income (loss) per share
(Note 6). Based on the weighted average number of common shares
outstanding (in millions) of 74.0 in 1996 and 107.2 in 1995.
***Each share of preference stock is represented by two depositary shares.
Each depositary share accrues dividends quarterly at a rate of $.45 per
share, or one-half the rate paid on the preference stock.
(See Accompanying Notes)
<PAGE>
<PAGE> 5
CONDENSED CONSOLIDATED BALANCE SHEETS
Sun Company, Inc. and Subsidiaries
<TABLE>
<CAPTION>
At At
June 30 December 31
1996 1995*
(Millions of Dollars) (UNAUDITED)
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 64 $ 11
Note receivable from divestment of Suncor
common stock -- 130
Accounts and other notes receivable, net 791 637
Inventories:
Crude oil 135 184
Refined products 263 272
Materials, supplies and other 67 66
Deferred income taxes 143 132
Investment in discontinued operations (Note 2) 148 143
------ ------
Total Current Assets 1,611 1,575
Investment in Real Estate Operations Held
for Sale (Note 3) 77 87
Long-Term Receivables and Investments 102 104
Properties, Plants and Equipment 5,695 5,794
Less Accumulated Depreciation, Depletion
and Amortization 2,737 2,746
------ ------
Properties, Plants and Equipment, net 2,958 3,048
Deferred Charges and Other Assets 262 271
------ ------
Total Assets $5,010 $5,085
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 863 $ 776
Accrued liabilities 494 502
Short-term borrowings -- 54
Current portion of long-term debt 3 3
Taxes payable 130 131
------ ------
Total Current Liabilities 1,490 1,466
Long-Term Debt 886 888
Retirement Benefit Liabilities 507 506
Deferred Income Taxes 88 94
Other Deferred Credits and Liabilities 408 432
Commitments and Contingent Liabilities (Note 7)
Stockholders' Equity (Note 8) 1,631 1,699
------ ------
Total Liabilities and Stockholders' Equity $5,010 $5,085
====== ======
</TABLE>
- --------------
*Restated to conform to the 1996 presentation (Note 2).
(See Accompanying Notes)
<PAGE>
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
------------------
1996 1995*
----- -----
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8) $ 44
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Income from discontinued operations (38) (210)
Cumulative effect of change in accounting
principle -- 87
Provision for write-down of assets and other
matters 85 93
Depreciation, depletion and amortization 132 131
Deferred income taxes (26) (18)
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable (154) (101)
Inventories 57 (65)
Accounts payable and accrued liabilities 63 (30)
Taxes payable (1) (80)
Other (16) (16)
----- -----
Net cash provided by (used in) continuing
operations 94 (165)
Net cash provided by discontinued operations 52 170
----- -----
Net cash provided by operating activities 146 5
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (104) (212)
Cash provided by (used in) operations held
for sale 11 (4)
Investing activities of discontinued operations (8) (85)
Proceeds from divestment of Suncor common stock 135 635
Proceeds from other divestments 7 39
Other 1 7
----- -----
Net cash provided by investing activities 42 380
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of short-term borrowings (54) (184)
Repayments of long-term debt (2) (95)
Financing activities of discontinued operations -- 15
Cash dividend payments on preference stock (22) --
Cash dividend payments on common stock (38) (96)
Purchases of common stock for treasury (6) --
Other (13) 5
----- -----
Net cash used in financing activities (135) (355)
----- -----
Net increase in cash and cash equivalents 53 30
Cash and cash equivalents at beginning of period 11 86
----- -----
Cash and cash equivalents at end of period $ 64 $ 116
===== =====
</TABLE>
- ---------------
*Restated to conform to the 1996 presentation (Note 2).
(See Accompanying Notes)
<PAGE>
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. General.
The accompanying condensed consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and
generally accepted accounting principles for interim financial
reporting. They do not include all disclosures normally made in
financial statements contained in Form 10-K. In management's opinion
all adjustments necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods shown
have been made. All such adjustments are of a normal recurring nature
except for the provisions for write-down of assets and other matters
(Note 4) and the cumulative effect of change in accounting principle
(Note 5). Results for the three and six months ended June 30, 1996
are not necessarily indicative of results for the full year 1996.
2. Discontinued Operations.
On July 24, 1996, the Company signed an agreement to sell its
international oil and gas production business to Agip (U.K.) Limited.
The sale, which should be completed during the third quarter of 1996,
is expected to result in an after-tax gain of approximately $115
million. The actual gain to be recorded will be determined as of the
date of sale and will be based on the actual cash proceeds received.
Cash proceeds from this divestment should approximate $260 million.
The sale of this business represents the completion of the Company's
withdrawal from oil and gas exploration and production activities.
Previously, the Company withdrew from international exploration
activities in 1992 and divested its remaining 55-percent interest in
Suncor Inc., its Canadian integrated oil company, in June 1995. Sun
received $770 million in pretax cash proceeds from the sale of Suncor,
after commissions and discounts, of which $635 million was received in
June 1995 and $135 million was received in June 1996.
As a result of the decision to sell the international oil and gas
production business, such business and the previously divested
Canadian synthetic oil production and conventional oil and gas
exploration and production operations (collectively, "Canadian
upstream petroleum operations") have been classified as discontinued
operations for all periods presented in the condensed consolidated
financial statements and related footnotes. The following is a
summary of results of operations of these businesses for the six
months ended June 30, 1996 and 1995 (in millions of dollars):
<PAGE>
<PAGE> 8
<TABLE>
<CAPTION>
Canadian
International Upstream
Production Petroleum
Operations Operations Total
------------ ------------ -----
1996
----
<S> <C> <C> <C>
Income before provision for
income taxes $54 $ -- $ 54
Provision for income taxes 16 -- 16
--- ---- ----
Income from discontinued operations $38 $ -- $ 38
=== ==== ====
1995
----
Income before provision for
income taxes $48 $286* $334
Provision for income taxes 16 108* 124
--- ---- ----
Income from discontinued operations $32 $178* $210
=== ==== ====
</TABLE>
---------------
*Income from discontinued Canadian upstream petroleum operations
includes a $157 million gain (comprised of a pretax gain of
$242 million and applicable income taxes of $85 million)
attributable to the divestment of the Company's remaining 55-percent
interest in Suncor Inc.
Revenues from discontinued international production operations
totalled $131 and $128 million for the six months ended June 30, 1996
and 1995, respectively. Revenues from discontinued Canadian upstream
petroleum operations totalled $271 million during 1995 prior to the
completion of the Suncor sale on June 8.
The assets and liabilities relating to the discontinued international
production operations have been segregated in the condensed
consolidated balance sheets and separately reflected as an investment
in discontinued operations. Such amounts are detailed as follows at
June 30, 1996 (in millions of dollars):
Cash and cash equivalents $ 3
Accounts receivable 18
Properties, plants and equipment, net 199
Accounts payable and accrued liabilities (27)
Taxes payable (27)
Deferred income taxes (18)
----
Investment in discontinued operations $148
====
<PAGE>
<PAGE> 9
The following unaudited restated condensed consolidated statement of
operations of Sun for the year ended December 31, 1995 reflects the
international oil and gas production business and Canadian upstream
petroleum operations as discontinued operations (in millions of
dollars except per share amounts):
<TABLE>
<S> <C>
Sales and other operating revenue $9,834
Other income 43
------
Total revenues 9,877
------
Cost of products sold and operating expenses 7,011
Selling, general and administrative expenses 616
Taxes, other than income taxes 1,845
Depreciation, depletion and amortization 263
Provision for write-down of assets and other matters 93
Interest and debt expense 96
------
Total costs and expenses 9,924
------
Loss from continuing operations before credit
for income taxes and cumulative effect of
change in accounting principle (47)
Credit for income taxes (39)
------
Loss from continuing operations before cumulative
effect of change in accounting principle (8)
Income from discontinued operations 235
Cumulative effect of change in accounting principle (87)
------
Net income 140
Dividends on preference stock (22)
------
Net income attributable to common stock $ 118
======
Income (loss) per share of common stock:*
Loss from continuing operations before cumulative
effect of change in accounting principle $ (.33)
Income from discontinued operations 2.57
Cumulative effect of change in accounting principle (.95)
------
Net income $ 1.29
======
</TABLE>
--------------
*Represents both primary and fully diluted earnings per share. Based
on the weighted average number of common shares outstanding of 91.3
million in 1995.
<PAGE>
<PAGE> 10
3. Operations Held for Sale.
Real Estate Operations
Sun has been pursuing the disposition of the Company's investment in
Radnor Corporation, its wholly owned real estate development
subsidiary, since October 1991. This business is accounted for as an
investment held for sale. As a result, pretax income (loss) from real
estate operations, which totalled $1 million and $(1) million for the
six months ended June 30, 1996 and 1995, respectively, has been
included as a single amount in other income in the condensed
consolidated statements of operations.
The assets and liabilities relating to real estate operations have
been segregated in the condensed consolidated balance sheets and
separately reflected as an investment in operations held for sale.
Such amounts are detailed as follows:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
-------- -----------
(Millions of Dollars)
<S> <C> <C>
Inventories $ 77 $ 83
Properties, plants and equipment, net 139 144
Other assets 19 20
Debt (Note 7) (133) (132)
Other liabilities (25) (28)
----- -----
Investment in real estate operations
held for sale $ 77 $ 87
===== =====
</TABLE>
Coal and Cokemaking Operations
In January 1993, Sun decided to sell its coal and cokemaking
operations. In connection with this decision, Sun sold its western
U.S. coal operations during 1993 and certain of its eastern U.S. coal
operations during 1994. Prior to June 30, 1995, Sun's coal and
cokemaking operations had been accounted for as an investment held for
sale. However, effective June 30, 1995, the remaining coal and
cokemaking business became one of the Company's ongoing business units
and is no longer held for sale. Accordingly, the accompanying
condensed consolidated balance sheets of Sun as of June 30, 1996 and
December 31, 1995 contain the accounts of its coal and cokemaking
operations on a fully consolidated basis. The accompanying condensed
consolidated statements of operations and cash flows reflect coal and
cokemaking operations on a fully consolidated basis after June 30,
1995 and as an operation held for sale prior to this date. The prior
period condensed consolidated statements of operations and cash flows
were not restated to give effect to this change in presentation
because the impact of such a restatement would not have been material.
<PAGE>
<PAGE> 11
4. Write-downs of Assets and Other Matters.
During the second quarter of 1996, Sun recorded an $85 million ($53
million after-tax) provision for write-down of assets and other
matters related to the Company's Philadelphia refinery reconfiguration
project. The project is designed to complete the integration of what
had been two separate facilities (Point Breeze and Girard Point)
located next to each other in South Philadelphia. The integration,
which should be substantially completed by the end of 1996, is
expected to improve operating efficiencies, lower fixed costs, and
reduce on-going capital spending and working capital requirements.
The provision is comprised principally of the write-off of redundant
processing units and also includes an accrual for environmental
remediation activities associated with the reconfiguration.
During the second quarter of 1995, Sun recorded a provision to write
down to net realizable value certain assets in the refining and
marketing business and to establish accruals for employee terminations
and related costs. The following is a summary of the provision for
write-down of assets and other matters in the condensed consolidated
statements of operations for the three and six months ended June 30,
1995 (in millions of dollars):
<TABLE>
<CAPTION>
Provision for Write-Down
of Assets and Other Matters
---------------------------
Pretax After-Tax
------ ---------
<S> <C> <C>
Refining and marketing
assets $43 $28
Employee terminations
and related costs 50* 33
--- ---
$93 $61
=== ===
</TABLE>
---------------
*Includes $38 million attributable to termination benefits and $12
million related to future rental payments for vacated office space.
5. Change in Accounting Principle.
Effective January 1, 1995, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires companies to write down long-lived assets that
are impaired to estimated fair value. The write-downs recognized in
the first quarter of 1995 are reflected as a cumulative effect of
change in accounting principle in the condensed consolidated statement
of operations and relate to properties to be disposed of in the
Company's real estate, coal and refining and marketing operations.
<PAGE>
<PAGE> 12
The following table sets forth summary information concerning these
write-downs (in millions of dollars):
<TABLE>
<CAPTION>
Cumulative Effect
of Accounting Change
---------------------
Pretax After-tax
------ ---------
<S> <C> <C>
Real estate $ 33 $15
Coal 45 29
Refining and marketing* 67 43
---- ---
$145 $87
==== ===
</TABLE>
-------------
*Primarily service stations and terminals.
Other than the cumulative effect, this change did not have a
significant impact on Sun's results of operations during the first six
months of 1995. The results of operations during the first six months
of 1995 and 1996 for all properties to be disposed of were not
significant.
6. Earnings Per Share.
The primary loss per share for the three and six months ended June 30,
1996 was computed by dividing losses, after deducting dividends on the
preference stock issued in August 1995, by the weighted average number
of common shares outstanding. Fully diluted earnings per share
generally are determined by dividing earnings by the weighted average
number of shares outstanding, assuming redemption of the preference
shares for common stock. However, since the assumed redemption of
preference shares in the three and six months ended June 30, 1996
would have resulted in a smaller loss per share, fully diluted per
share amounts are the same as those reported on a primary basis.
7. Commitments and Contingent Liabilities.
In 1992, a wholly owned subsidiary of the Company became a one-third
partner in Belvieu Environmental Fuels ("BEF"), a joint venture formed
for the purpose of constructing, owning and operating a $225 million
methyl tertiary butyl ether ("MTBE") production facility in Mont
Belvieu, Texas. The construction of the facility, which had an
initial designed capacity of 12,600 barrels daily of MTBE, was
completed during 1995.
In order to obtain a secure supply of oxygenates for the manufacture
of reformulated fuels, Sun has entered into a 10-year off-take
agreement with BEF. Pursuant to this agreement, Sun will purchase all
of the MTBE production from the plant. The minimum price to be paid
for the first 12,600 barrels daily of MTBE production while a five-
year nonrecourse term loan financing this project is outstanding is
<PAGE>
<PAGE> 13
equal to BEF's annual raw material and operating costs associated with
this production and debt service payments. Notwithstanding this
minimum price, Sun has agreed to pay BEF prices through May 2000 which
approximate those included in existing MTBE long-term sales agreements
in the marketplace. These prices have exceeded the minimum price
required by the loan agreement. For the last four years the off-take
agreement is in place, Sun will negotiate a new price with BEF based
upon the market conditions existing at that time.
The Company guarantees the outstanding debt of Radnor Corporation, its
real estate operation held for sale. Such debt, which is due in
January 2001, totalled $133 million at June 30, 1996 (Note 3).
Sun is subject to numerous federal, state, local and foreign laws
regulating the discharge of materials into, or otherwise relating to
the protection of, the environment. The Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") and the Solid Waste
Disposal Act as amended by the Resource Conservation and Recovery Act
("RCRA"), and related state laws subject Sun to the potential
obligation to remove or mitigate the environmental effects of the
disposal or release of certain pollutants at Sun's facilities
including refineries, service stations, terminals, pipelines and truck
transportation facilities as well as at third-party or formerly-owned
sites at which contaminants generated by Sun may be located. Under
CERCLA, Sun is subject to potential joint and several liability for
the costs of remediation at sites at which it has been identified as a
"potentially responsible party" ("PRP"). As of June 30, 1996, Sun had
been named as a PRP at 49 sites identified or potentially identifiable
as "Superfund" sites under CERCLA. Sun has reviewed the nature and
extent of its involvement at each site and other relevant
circumstances and, based upon the other parties involved or Sun's
negligible participation therein, believes that its potential
liability associated with such sites will not be significant. Under
RCRA and related state laws, corrective remedial action has been
initiated at some of Sun's facilities and will be required to be
undertaken by Sun at various of its other facilities. The cost of
such remedial actions could be significant but is expected to be
incurred over an extended period of time. In addition, Sun is
currently involved in litigation with a private party to determine
responsibility for remediation at a formerly owned refinery in
Oklahoma. Management believes that Sun is fully indemnified for this
potential liability.
Sun establishes accruals related to environmental remediation
activities for work at identified sites where an assessment has
indicated that cleanup costs are probable and reasonably estimable.
The accrued liability for environmental remediation was classified in
<PAGE>
<PAGE> 14
the condensed consolidated balance sheets as follows (in millions of
dollars):
<TABLE>
<CAPTION>
At At
June 30 December 31
1996 1995
-------- -----------
<S> <C> <C>
Accrued liabilities $ 62 $ 55
Other deferred credits and
liabilities 143 144
---- ----
$205 $199
==== ====
</TABLE>
Pretax charges against income for environmental remediation totalled
$19 and $6 million for the six months ended June 30, 1996 and 1995,
respectively. The $13 million increase was largely attributable to an
accrual for remediation activities associated with the reconfiguration
of the Philadelphia refinery (Note 4). Claims for recovery of
environmental liabilities that are probable of realization totalled $8
million at June 30, 1996 and are included in deferred charges and
other assets in the condensed consolidated balance sheets.
Total future costs for environmental remediation activities will
depend upon, among other things, the identification of additional
sites, the determination of the extent of contamination of each site,
the timing and nature of required remedial actions, the technology
available and needed to meet the various existing legal requirements,
the nature and extent of future environmental laws, inflation rates
and the determination of Sun's liability at multi-party sites, if any,
in light of the number, participation levels and financial viability
of other parties.
Many other legal and administrative proceedings are pending against
Sun. The ultimate outcome of these proceedings and the matters
discussed above cannot be ascertained at this time; however, it is
reasonably possible that some of them could be resolved unfavorably to
Sun. Management believes that any expenditures attributable to these
matters will be incurred over an extended period of time and will be
funded from Sun's net cash flow from operating activities. Although
the ultimate impact of these matters could have a significant impact
on results of operations or cash flow for any future quarter or year,
management believes that any liabilities which may arise pertaining to
such matters would not be material in relation to the consolidated
financial position of Sun at June 30, 1996. Furthermore, management
believes that the overall costs for environmental activities will not
have a material impact, over an extended period of time, on Sun's cash
flow or liquidity.
<PAGE>
<PAGE> 15
8. Stockholders' Equity.
<TABLE>
<CAPTION>
At At
June 30 December 31
1996 1995
-------- -----------
(Millions of Dollars)
<S> <C> <C>
Cumulative preference stock - Series A,
no par value $ 750 $ 750
Common stock, par value $1 per share 130 130
Capital in excess of par value 1,316 1,310
Earnings employed in the business 1,450 1,518
------ ------
3,646 3,708
Less common stock held in treasury,
at cost 2,015 2,009
------ ------
Total $1,631 $1,699
====== ======
</TABLE>
<PAGE>
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------
1996 1995 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $(24) $(37) $ 13
Sunoco Northeast Marketing 6 5 1
Sunoco Chemicals 18 42 (24)
Sunoco Lubricants (1) (11) 10
Sunoco MidAmerica Marketing &
Refining 1 (12) 13
Sunoco Logistics 26 25 1
Sun Coal and Coke 15 12 3
Corporate expenses (11) (12) 1
Net financing expenses (24) (32) 8
Real estate operations held
for sale 1 -- 1
Sun International Production 38 32 6
Canada (Suncor) -- 23 (23)
---- ---- ----
45 35 10
Special items:*
Gain on divestment of Suncor
common stock -- 157 (157)
Provision for write-down of assets
and other matters (53) (61) 8
Cumulative effect of change in
accounting principle -- (87) 87
---- ---- ----
Consolidated net income (loss) $ (8) $ 44 $ (52)
==== ==== ====
</TABLE>
- ----------------
*For a discussion of special items, see Notes 2, 4 and 5 to the condensed
consolidated financial statements.<PAGE>
<PAGE> 17
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the six-month period ended June 30, 1996, Sun had a net loss of $8
million, or $.41 loss per share of common stock, compared with net income
of $44 million, or $.41 per share of common stock, for the first half of
1995. Excluding the special items shown separately in the Earnings Profile
of Sun Businesses, Sun earned $45 million in the first six months of 1996
compared to $35 million in the first six months of 1995.
Sun Northeast Refining -- The Sun Northeast Refining business, which
consists of the manufacturing and wholesale marketing of fuels produced at
Sun's Marcus Hook, PA and Philadelphia, PA refineries, had a loss of $24
million in the first six months of 1996 compared to a loss of $37 million
in the first half of 1995. The decline in the operating loss was due
primarily to higher average wholesale fuels product margins ($29 million),
partially offset by higher refinery operating expenses ($15 million) caused
largely by an increase in refinery fuel costs. The improvement in
wholesale fuels margins reflects the favorable impact of stronger market
conditions for distillate products, partially offset by lower wholesale
gasoline and asphalt margins. Increased planned refinery maintenance
activity also adversely impacted operating results during the first half of
1996.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business,
which consists of the retail sale of gasoline and middle distillates in New
England and the Mid-Atlantic states and convenience-store operations in
these regions, earned $6 million in the current six-month period versus $5
million in the first half of 1995. The increase in operating results was
due to higher retail gasoline margins ($8 million), essentially offset by
an increase in marketing expenses.
Sunoco Chemicals -- The Sunoco Chemicals business consists of the
manufacturing and marketing of commodity and intermediate petrochemicals
produced at the Marcus Hook and Philadelphia refineries, at an ethylene
oxide plant in Brandenburg, KY and at a joint venture MTBE facility in Mont
Belvieu, TX. Sunoco Chemicals earned $18 million in the first half of 1996
versus $42 million in the first six months of 1995. The decline in
earnings was primarily due to significantly lower margins for most
petrochemicals products compared to the strong margins experienced in the
first half of 1995. Production shortfalls due to maintenance activities at
Sun's Northeast refineries also negatively impacted Sunoco Chemicals during
the first half of 1996.
Sunoco Lubricants -- The Sunoco Lubricants business, which is comprised of
the manufacturing, packaging and marketing of lubricating and specialty
oils produced at Sun's Tulsa, OK and Puerto Rico refineries as well as the
related manufacturing and wholesale marketing of fuels produced at these
facilities, lost $1 million in the 1996 first half, compared to a loss of
$11 million in the first six months of 1995. The improvement in operating
results was primarily due to higher sales volumes of both lubricants ($9
million) and related fuels ($6 million) reflecting an increase in refinery
production levels and to higher margins on wholesale fuels products ($11
million) primarily resulting from a stronger market for distillate
products. These positive factors were partially offset by the impact of
<PAGE>
<PAGE> 18
lower margins on lubricant products ($5 million) and higher operating
expenses ($10 million) largely attributable to an increase in refinery fuel
costs.
Sunoco MidAmerica Marketing & Refining -- The Sunoco MidAmerica Marketing &
Refining business consists of the retail sale of gasoline and middle
distillates and convenience-store operations in the midwestern U.S.
(primarily Ohio and Michigan) as well as the manufacturing and wholesale
marketing of fuels and petrochemicals produced at Sun's Toledo, OH
refinery. Sunoco MidAmerica Marketing & Refining earned $1 million during
the first half of 1996, compared to a loss of $12 million in the 1995 first
half. Improved fuels margins ($20 million), particularly in the wholesale
market, more than offset the decline in margins on petrochemicals (largely
xylene) produced at the Toledo refinery ($9 million). Higher refinery
production levels and lower expenses in the retail side of the business
were offset by higher refinery fuel costs.
Sunoco Logistics -- The Sunoco Logistics business, which consists of
pipeline transportation of crude oil and refined petroleum products,
domestic crude oil acquisition from third-party leases, crude oil trucking
and the Nederland, TX crude oil terminalling operation, earned $26 million
in the first six months of 1996 versus $25 million in the year-ago period.
The increase was due largely to higher earnings from Sun's joint venture
pipeline systems.
Sun Coal and Coke -- The Sun Coal and Coke business consists of coal
production from mines in Virginia and Kentucky and coke manufacturing at
the Company's facility in Vansant, VA. Sun Coal and Coke earned $15
million in the first half of 1996 versus $12 million in the first half of
1995. The increase in earnings was due to improved operations ($2 million)
and higher coke margins ($1 million).
Net Financing Expenses -- Net financing expenses were down $8 million
versus the year-ago period due to lower average total borrowings as the
Company substantially reduced its debt level in the second half of 1995.
Real Estate Operations Held for Sale -- Real estate operations held for
sale earned $1 million in the current half versus break-even results during
the first half of 1995. For a further discussion of Sun's real estate
operations held for sale, see Note 3 to the condensed consolidated
financial statements.
Sun International Production -- Sun International Production earnings were
$38 million in the 1996 first half, compared with $32 million in the first
six months of 1995. The increase in earnings was attributable to higher
crude oil prices.
On July 24, 1996, the Company signed an agreement to sell its international
oil and gas production business to Agip (U.K.) Limited. The sale, which
should be completed during the third quarter of 1996, is expected to result
in an after-tax gain of approximately $115 million. The actual gain to be
recorded will be determined as of the date of sale and will be based on the
actual cash proceeds received. Cash proceeds from this divestment should
approximate $260 million. Sun is considering several options for the use
of these proceeds including investment in its ongoing operations and the
repurchase of Sun stock. For additional information, see Note 2 to the
condensed consolidated financial statements.
<PAGE>
<PAGE> 19
Special Items -- For a discussion of the special items shown separately in
the Earnings Profile of Sun Businesses, see Notes 2, 4 and 5 to the
condensed consolidated financial statements.
Analysis of Consolidated Statements of Operations
- -------------------------------------------------
Sales and other operating revenue increased $289 million, or 6 percent,
principally due to higher domestic refined product sales volumes ($251
million) and prices ($199 million), higher revenues from resales of
purchased crude oil and refined products ($250 million) and the inclusion
in the first half of 1996 of sales and other operating revenue attributable
to Sun's coal and cokemaking business ($83 million) (see Note 3 to the
condensed consolidated financial statements). Partially offsetting these
positive factors were lower sales and other operating revenue attributable
to Canadian refining and marketing operations ($525 million, including
Canadian consumer excise taxes of $207 million) as a result of the
divestment of Suncor on June 8, 1995. Interest income increased $4 million
principally due to interest earned on the installment note receivable from
the divestment of Suncor, which was collected in June 1996. Other income
increased $6 million due to higher equity in earnings of affiliated
companies ($4 million).
Cost of products sold and operating expenses increased $497 million, or 14
percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($361 million), higher resales of purchased crude oil and
refined products ($252 million), higher domestic refinery operating
expenses ($54 million) and the inclusion in the first half of 1996 of costs
attributable to Sun's coal and cokemaking business ($57 million). The
increase in cost of products sold and operating expenses was partially
offset by lower costs and operating expenses attributable to the divestment
of Canadian refining and marketing operations ($281 million). Selling,
general and administrative expenses decreased $50 million, or 15 percent,
due to lower Canadian refining and marketing expenses as a result of the
Suncor divestment. Taxes, other than income taxes decreased $179 million,
or 18 percent, principally due to lower consumer excise taxes ($174
million) attributable to the Suncor divestment. Depreciation, depletion
and amortization increased $1 million, or 1 percent, primarily as a result
of higher depreciation at Sun's domestic refining and marketing operations
and the inclusion in the first half of 1996 of amounts attributable to
Sun's coal and cokemaking business, partially offset by the decline
resulting from the Suncor divestment. For a discussion of the provisions
for write-down of assets and other matters recorded in the second quarters
of 1996 and 1995, see Note 4 to the condensed consolidated financial
statements. Interest cost and debt expense decreased $15 million, or 27
percent, due to lower average borrowings. For a discussion of the
cumulative effect of change in accounting principle, see Note 5 to the
condensed consolidated financial statements.
<PAGE>
<PAGE> 20
RESULTS OF OPERATIONS - THREE MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
June 30
------------------
1996 1995 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $ 4 $ -- $ 4
Sunoco Northeast Marketing 7 (2) 9
Sunoco Chemicals 11 22 (11)
Sunoco Lubricants (3) (2) (1)
Sunoco MidAmerica Marketing &
Refining 5 1 4
Sunoco Logistics 15 13 2
Sun Coal and Coke 8 8 --
Corporate expenses (6) (6) --
Net financing expenses (11) (17) 6
Real estate operations held
for sale 1 -- 1
Sun International Production 19 13 6
Canada (Suncor) -- 12 (12)
---- ---- -----
50 42 8
Special items:*
Gain on divestment of Suncor
common stock -- 157 (157)
Provision for write-down of assets
and other matters (53) (61) 8
---- ---- -----
Consolidated net income (loss) $ (3) $138 $(141)
==== ==== =====
</TABLE>
- ----------------
*For a discussion of special items, see Notes 2 and 4 to the condensed
consolidated financial statements.
<PAGE>
<PAGE> 21
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the three-month period ended June 30, 1996, Sun had a net loss of $3
million, or $.19 per share of common stock, compared with net income of
$138 million, or $1.29 per share of common stock, for the second quarter of
1995. Excluding the special items shown separately in the Earnings Profile
of Sun Businesses, Sun earned $50 million in the second quarter of 1996
compared to $42 million in the second quarter of 1995.
Sun Northeast Refining -- The Sun Northeast Refining business earned $4
million in the second quarter of 1996 versus break-even in the second
quarter of 1995. The improvement was due primarily to higher average
wholesale fuels product margins ($10 million), partially offset by higher
refinery operating expenses ($8 million). The improvement in wholesale
fuels margins reflects the favorable impact of stronger market conditions
for distillate products, partially offset by lower margins for wholesale
gasoline (particularly premium) and asphalt. The higher refinery operating
expenses were due largely to higher refinery fuel costs (both produced and
purchased) resulting from higher crude oil and natural gas prices.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business
earned $7 million in the current quarter versus a loss of $2 million in the
second quarter of 1995. The increase in operating results was due to
improved retail gasoline margins, as Sunoco Northeast Marketing began to
recover the rapid run-up in crude oil prices that occurred in the first
quarter of 1996. Partially offsetting this positive factor was an increase
in marketing expenses.
Sunoco Chemicals -- Sunoco Chemicals earned $11 million in the second
quarter of 1996 versus $22 million in the second quarter of 1995. The
decline in earnings was primarily due to significantly lower margins ($9
million) for most petrochemicals products compared to the strong margins
experienced in the second quarter of 1995.
Sunoco Lubricants -- The Sunoco Lubricants business lost $3 million in the
1996 second quarter, compared to a loss of $2 million in the 1995 second
quarter. The adverse impacts of significantly higher average crude oil
costs on lubricants and residual fuel margins and increased refinery
natural gas costs were largely offset by a 17 percent increase in
lubricants sales volumes, higher refinery production volumes and stronger
distillate margins.
Sunoco MidAmerica Marketing & Refining -- Sunoco MidAmerica Marketing &
Refining earned $5 million during the 1996 second quarter, compared to
earnings of $1 million in the 1995 second quarter. Improved fuels margins
in the wholesale market ($6 million), higher refinery production levels ($3
million) and lower expenses in the retail side of the business ($3 million)
more than offset the impact of lower chemicals margins ($3 million) and
higher refinery expenses ($6 million) which resulted from an increase in
refinery fuel costs.
Sunoco Logistics -- The Sunoco Logistics business earned $15 million in the
second quarter of 1996 versus $13 million in the year-ago period. The
increase was largely due to higher earnings from Sun's joint venture
pipeline systems and from its Nederland terminal operations.
<PAGE>
<PAGE> 22
Net Financing Expenses -- Net financing expenses totalled $11 million for
the second quarter of 1996 compared to $17 million for the second quarter
of 1995. The decrease was primarily due to lower average total borrowings
as the Company substantially reduced its debt level in the second half of
1995.
Real Estate Operations Held for Sale -- Real estate operations held for
sale earned $1 million in the current quarter versus break-even results for
the year-ago period. For a further discussion of Sun's real estate
operations held for sale, see Note 3 to the condensed consolidated
financial statements.
Sun International Production -- Sun International Production earnings were
$19 million in the 1996 second quarter versus earnings of $13 million in
the 1995 second quarter. The increase in earnings was attributable to
higher crude oil prices ($3 million) and higher natural gas volumes ($3
million).
Special Items -- For a discussion of the special items shown separately in
the Earnings Profile of Sun Businesses, see Notes 2 and 4 to the condensed
consolidated financial statements.
Analysis of Consolidated Statements of Operations
- -------------------------------------------------
Sales and other operating revenue increased $306 million, or 12 percent,
principally due to higher domestic refined product sales volumes ($192
million) and prices ($95 million), higher revenues from resales of
purchased crude oil and refined products ($163 million) and the inclusion
in the second quarter of 1996 of sales and other operating revenue
attributable to Sun's coal and cokemaking business ($42 million).
Partially offsetting these positive factors were lower sales and other
operating revenue attributable to the divested Canadian refining and
marketing operations ($219 million, including Canadian consumer excise
taxes of $86 million). Other income increased $2 million primarily due to
higher equity in earnings of affiliated companies ($1 million).
Cost of products sold and operating expenses increased $363 million, or 20
percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($235 million), higher resales of purchased crude oil and
refined products ($163 million), higher domestic refinery operating
expenses ($32 million) and the inclusion in the second quarter of 1996 of
costs attributable to Sun's coal and cokemaking business ($30 million).
The increase in cost of products sold and operating expenses was partially
offset by lower costs and operating expenses attributable to the divested
Canadian refining and marketing operations ($114 million). Selling,
general and administrative expenses decreased $14 million, or 8 percent,
primarily due to lower Canadian refining and marketing expenses as a result
of the Suncor divestment, partially offset by higher domestic marketing
expenses. Taxes, other than income taxes decreased $58 million, or 12
percent, principally due to lower consumer excise taxes ($57 million)
resulting from the Suncor divestment. Depreciation, depletion and
amortization increased $2 million, or 3 percent, primarily as a result of
higher depreciation at Sun's domestic refining and marketing operations and
the inclusion in the second quarter of 1996 of amounts attributable to
Sun's coal and cokemaking business, partially offset by the decline
<PAGE>
<PAGE> 23
resulting from the Suncor divestment. For a discussion of the provisions
for write-down of assets and other matters recorded in the second quarters
of 1996 and 1995, see Note 4 to the condensed consolidated financial
statements. Interest cost and debt expense decreased $8 million, or 29
percent, due to lower average borrowings.
FINANCIAL CONDITION
Cash and Working Capital
- ------------------------
At June 30, 1996, Sun had cash and cash equivalents of $64 million compared
to $11 million at December 31, 1995, and had working capital of $121
million compared to working capital of $109 million at December 31, 1995.
Sun's working capital position is considerably stronger than indicated
because of the relatively low historical costs assigned under the LIFO
method of accounting for most of the inventories reflected in the condensed
consolidated balance sheet. The current replacement cost of all such
inventories exceeds the carrying value at June 30, 1996 and December 31,
1995 by $563 million and $528 million, respectively. Inventories valued at
LIFO, which consist of crude oil and refined products, are readily
marketable at their current replacement values. Management believes that
the current levels of Sun's cash and working capital provide adequate
support for ongoing operations.
Cash Flows and Financial Capacity
- ---------------------------------
In the first six months of 1996, Sun's net cash provided by operating
activities was $146 million compared to $5 million in the first six months
of 1995. This $141 million improvement was largely due to a decrease in
working capital uses pertaining to operating activities, partially offset
by a decline in net cash provided by discontinued operations.
Divestment activities have also been a source of cash and have enhanced
liquidity. In June 1996, Sun received the final cash proceeds from the
sale of Suncor. As a result of the sale, Sun has received total pretax
cash proceeds of $770 million, of which $635 million was received in June
1995 and $135 million was received in June 1996.
Management believes that future cash provided by continuing operations
("cash generation") will be sufficient to satisfy Sun's capital
requirements and to pay the current cash dividends on common and preference
stock. However, from time to time, the Company's short-term cash
requirements may exceed its cash generation due to various factors
including volatility in crude oil and refined product markets and increases
in capital spending and working capital levels. During those periods, the
Company may supplement its cash generation with proceeds from divestment
and financing activities. In the event that cash generation and divestment
proceeds are insufficient to satisfy near-term cash requirements, the
Company has access to $600 million of short-term financing in the form of
commercial paper and revolving credit agreements from commercial banks.
The Company also has access to short-term financing under non-committed
money market facilities.
<PAGE>
<PAGE> 24
The following table sets forth amounts outstanding related to the above
short-term borrowing arrangements as well as to Sun's other borrowings at:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
-------- -----------
(Millions of Dollars)
<S> <C> <C>
Short-term borrowings
Commercial paper $ -- $ 4
Non-committed money market
facilities -- 50
---- ----
-- 54
Current portion of long-term debt 3 3
Long-term debt 886 888
---- ----
Total borrowings $889 $945
==== ====
</TABLE>
As of June 30, 1996, Sun's debt-to-capital ratio was 35.3 percent.
Management believes there is sufficient borrowing capacity available to
provide for Sun's future cash requirements.
<PAGE>
<PAGE> 25
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Many legal and administrative proceedings are pending against Sun.
Although the ultimate outcome of these proceedings cannot be
ascertained at this time, it is reasonably possible that some of them
could be resolved unfavorably to Sun. Management of Sun believes that
any liabilities which may arise from such proceedings, including those
discussed above, would not be material in relation to the consolidated
financial position of Sun at June 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's shareholders was held on May 2,
1996. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934 and there was no solicitation
in opposition to the Company's solicitations. At this meeting, the
shareholders were requested (1) to act upon the appointment of
independent accountants and (2) to elect a Board of Directors. The
following action was taken by the Company's shareholders with respect
to each of the above items:
1. Concerning the motion to appoint Ernst & Young LLP as the
Company's independent accountants, there was a total of
73,853,242 votes cast, with an aggregate of 73,461,189 votes cast
in favor of such appointment, 392,053 against and 409,423
withheld (abstentions). There were no broker non-votes.
2. Concerning the election of a Board of Directors of the Company,
there was a total of 74,261,198 votes cast. Each of the
following individuals continued his or her term of office as a
director of the Company and was re-elected to the Board of
Directors. The tabulation below sets forth the number of votes
cast for, against or withheld (abstentions) for each director.
There were no broker non-votes.
<TABLE>
<CAPTION>
Number
Number Number "WITHHELD"
NAME "FOR" "AGAINST" (ABSTENTIONS)
-------------- ---------- --------- ------------
<S> <C> <C> <C>
R. H. Campbell 72,049,876 2,211,322 1,467
R. E. Cartledge 72,141,055 2,120,143 1,467
R. E. Cawthorn 72,202,800 2,058,398 1,467
M. J. Evans 72,051,052 2,209,747 1,866
T. P. Gerrity 72,194,719 2,066,380 1,566
J. G. Kaiser 71,602,191 2,657,326 3,148
R. D. Kennedy 72,164,597 2,096,601 1,467
T. W. Langfitt 71,983,910 2,271,511 7,244
R. A. Pew 72,015,103 2,239,165 8,397
W. F. Pounds 72,113,839 2,146,371 2,455
A. B. Trowbridge 71,601,060 2,659,932 1,673
</TABLE>
<PAGE>
<PAGE> 26
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10 - Stock Purchase Agreement in respect of the entire issued shares
of stock of Sun Oil Britain Limited dated July 24, 1996.
11 - Statements re Sun Company, Inc. and Subsidiaries Computation of
Per Share Earnings for the Six-Month and Three-Month Periods
Ended June 30, 1996 and 1995.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Six-Month Period Ended
June 30, 1996.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
Reports on Form 8-K:
A report on Form 8-K dated May 8, 1996 was filed to disclose under
Item 5 -- "Other Events" and Item 7 -- "Financial Statements and
Exhibits," the Company's press release dated May 8, 1996 announcing
that it filed an amendment to its Form 10-Q for the period ended March
31, 1996.
*****************************
We are pleased to furnish this report to shareholders who request it by
writing to:
Sun Company, Inc.
Investor Relations
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
<PAGE>
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SUN COMPANY, INC.
BY s/ THOMAS W. HOFMANN
-----------------------
Thomas W. Hofmann
Comptroller
(Principal Accounting Officer)
DATE August 8, 1996
<PAGE>
<PAGE> 1
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -----------------------------------------
10 Stock Purchase Agreement in respect of the entire issued
shares of stock of Sun Oil Britain Limited dated July 24,
1996.
11 Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Six-Month and Three-Month
Periods Ended June 30, 1996 and 1995.
12 Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Six-Month
Period Ended June 30, 1996.
27 Article 5 of Regulation S-X, Financial Data Schedule.
<PAGE>
<PAGE> 1 Exhibit 10
DATED 24th JULY 1996
-----------------------------------
SUN COMPANY, INC. (1)
and
AGIP (U.K.) LIMITED (2)
-------------------------------------
STOCK PURCHASE AGREEMENT
in respect of the entire issued shares
of stock of Sun Oil Britain Limited
Norton Rose
London
<PAGE>
<PAGE> 2
CONTENTS
--------
Clause Heading Page
- ------ ------- ----
1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Sale and Purchase of the Sale Shares . . . . . . . . . . . . . . . .13
3 Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4 Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5 Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
6 Post-Completion Matters. . . . . . . . . . . . . . . . . . . . . . 38
7 Representations and Warranties . . . . . . . . . . . . . . . . . . 56
8 Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 65
11 Variation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
13 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15 Agent for Service. . . . . . . . . . . . . . . . . . . . . . . . . 68
Schedule
- --------
1 The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
2 The Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 71
3 Warranties and Representations . . . . . . . . . . . . . . . . . . 73
4 Licences, and other related information. . . . . . . . . . . . . . 98
<PAGE>
<PAGE> 3
5 The Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Part 1 The Freehold Property . . . . . . . . . . . . . . . . 107
Part 2 The Leasehold Properties. . . . . . . . . . . . . . . 107
Part 3 The Underleases . . . . . . . . . . . . . . . . . . . 108
6 Retention Bonuses of Employees . . . . . . . . . . . . . . . . . . 109
7 Form of Resignation Letter . . . . . . . . . . . . . . . . . . . . 110
8 Deed of Tax Indemnity. . . . . . . . . . . . . . . . . . . . . . . 111
9 Preliminary Net Working Capital Statement. . . . . . . . . . . . . 126
10 Guarantees and Counter-Indemnities . . . . . . . . . . . . . . . . 127
11 Allocation of Purchase Price Pursuant to
clause 6.9(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 128
12 United States Federal, State and Local Taxes . . . . . . . . . . . 129
<PAGE>
<PAGE> 4
THIS AGREEMENT is made the 24th day of July, 1996 BETWEEN:
(1) SUN COMPANY, INC., a company incorporated under the laws of
the Commonwealth of Pennsylvania and having its principal
place of business at Ten Penn Center, 1801 Market Street,
Philadelphia, PA 19103-1699 ("Seller"); and
(2) AGIP (U.K.) LIMITED a company incorporated in England whose
registered office is at Agip House, 10 Ebury Bridge Road,
London SW1W 8PZ ("Purchaser").
WHEREAS:
(A) Seller wishes to sell and Purchaser wishes to buy the Sale
Shares on the terms and conditions set out herein; and
(B) As at the date hereof, the Subsidiaries (further particulars
of which are set out in Schedule 2) are the only
subsidiaries of the Company.
NOW THEREFORE IT IS HEREBY AGREED as follows:
1 Definitions
1.1 In this Agreement (including the recitals and Schedules
hereto), the following expressions shall, except where the
context otherwise requires, have the following respective
meanings:
"Accounts" means the Sterling audited consolidated accounts
of the Company and the Subsidiaries as at the Economic Date,
prepared in accordance with clause 3.6 and prepared on a
proforma basis on the assumption that BSOC was a subsidiary
of the Company on the Economic Date notwithstanding that it
did not become a subsidiary of the Company until 17th July
1996;
"Adjustment" means any or all (as the context may require)
of the adjustments required by clause 3.2 and 3.3;
"Affiliate" means in relation to any Party, a subsidiary or
a holding company of that Party and includes the ultimate
holding company of that Party and any subsidiary of that
holding company and for the purposes of this definition
"holding company" and "subsidiary" shall be construed in
accordance with section 736 of the Companies Act 1985;
"Agreed Rate" means 5.5% per annum;
<PAGE>
<PAGE> 5
"Audited Accounts" means the Sterling audited financial
statements of the Company and of each of the Subsidiaries
and the Sterling audited consolidated financial statements
of the Company and the Subsidiaries (other than BSOC), for
each of the two accounting reference periods ended on 31
December 1994 and 31 December 1995 respectively, which
financial statements comprise a balance sheet, profit and
loss account, notes, and auditors' and directors' report
copies of which are attached to the Disclosure Letter;
"Auditors" means the auditors of the Company, namely Ernst &
Young of Becket House, 1 Lambeth Palace Road, London SE1
7EU;
"Brown & Root Agreement" means an Operations Alliance
Agreement made effective as of 1st January 1995 between the
Company and Brown & Root Limited;
"BSOC" means British Sun Oil Company Limited, as described
in Schedule 2B;
"Business Day" means a day (other than a Saturday, a Sunday
or a legal, bank or public holiday) on which banks are or,
as the context may require, were generally open for business
in England and the United States of America;
"Calculation Period" means:
(i) if Completion occurs on or before 31st July 1996
the period between the date hereof and the
Completion Date; or
(ii) if Completion shall occur after 31st July, 1996,
the period from the date hereof until 31st July,
1996, each successive period of one calendar month
ending on or before the Completion Date and any
period beginning with the day next following the
last of such calendar months and ending on the
Completion Date;
"the Company" means Sun Oil Britain Limited, as described in
Schedule 1;
"Completion" means the completion of the sale and purchase
of the Sale Shares in accordance with the provisions of this
Agreement;
"Completion Date" means the date of Completion;
<PAGE>
<PAGE> 6
"Consideration" has the meaning given in clause 3.1;
"CAA 1990" means the Capital Allowances Act 1990;
"CT" means Corporation Tax as charged under ICTA 1988 (as
amended);
"Data" means all accounts, books and data in the possession
of Seller and its Affiliates relating to the Licence
Interests including, without prejudice to the generality of
the foregoing, contracts, correspondence, information, data
and reports (including petroleum engineering, reservoir
engineering, drilling, geological, geophysical and all other
kinds of technical data and reports, samples, well-logs and
analysis in whatever form the same are maintained) whether
of a technical, legal or financial nature;
"Data Room" means the data room established by Seller at the
Company's offices at Spencer House, 23 Sheen Road, Richmond,
Surrey containing documentation and information relating to
the Company and its business and assets as such
documentation is listed in an index thereof attached to the
Disclosure Letter;
"Deed of Tax Indemnity" means a deed in the form set out in
Schedule 8;
"Disclosure Letter" means the letter of even date herewith
delivered to Purchaser by Seller;
"Dollars" or "$" means dollars of the United States of
America;
"Economic Date" means 2400 hours (British Summer Time) on
30th June 1996;
"Employees" means the employees listed in Appendix 4 Part A
of the Disclosure Letter employed by the Company at the date
hereof;
"Encumbrance" means any encumbrance or security interest
whatsoever, howsoever created or arising, including (without
prejudice to the generality of the foregoing) any right of
ownership, security, mortgage, fixed or floating charge,
pledge, charge option, restriction, right of first refusal,
right of pre-emption, third party right or interest, lease,
lien, assignment for the purpose of providing security,
statutory right in rem, hypothecation, title retention,
<PAGE>
<PAGE> 7
attachment, levy, claim, right of possession or detention or
right of set-off;
"Environment" means all or any of the media of air, water
and land (wherever occurring) and in relation to the media
of air and water includes without limitation the air and
water within buildings and the air and water within other
natural or man-made structures above or below ground;
"Environmental Law" means all or any applicable
international, EC, national or local law or regulation
arising through, inter alia, treaty convention, directive,
regulation, statute, subordinate legislation, or common law
or any relevant code of practice in each case having the
force of law in the United Kingdom on the date hereof issued
by any competent authority relating to Environmental
Matters;
"Environmental Liability or Liabilities" means all
reasonable costs, expenses, liabilities, claims, damages,
penalties or fines necessarily incurred by the Company
arising from:
(a) any binding legal requirement, direction, notice, order
or obligation served or imposed by any competent
authority or court of competent jurisdiction under
Environmental Law which, for the avoidance of doubt,
shall include any requirements under Environmental Law
relating to the decommissioning, abandonment, closure
or other discontinuance of operations at or of any oil
or gas related installation, vessel, structure,
terminal or pipeline; or
(b) the carrying out of any investigatory, monitoring,
precautionary, remedial or engineering works (whether
on the Premises or elsewhere) which are necessary to
avoid the issue, service or imposition of any notice,
requirement or obligation by any competent authority or
court of competent jurisdiction under Environmental Law
or to ensure that the business of the Company can
continue to be carried on in compliance with
Environmental Law; or
(c) the repair, replacement or rebuilding of any part of
the Premises or any plant, equipment, installation,
pipelines, vessel or facility associated with the
Licences as a result of a breach of Environmental Law;
<PAGE>
<PAGE> 8
including in each case all reasonable legal, consulting,
monitoring, laboratory and other professional fees;
"Environmental Matters" means the pollution of the
Environment, the protection of the Environment and human
health, the protection of natural amenity, the production,
disposal, release, use, storage, spillage, deposit, escape,
discharge, leak, emission, recovery, transport of, or
radiation from any Hazardous Material or Waste or any
matters regarding the construction, operation,
decommissioning or abandonment of any oil or gas related
installation, technical, pipeline or vessel to the extent
that any such action may have any impact on the Environment
or on the health of living organisms;
"Environmental Permits" means the permits, licences,
consents or authorisations required or held by the Company
or any Operator in respect of any Licence under
Environmental Law in relation to the carrying on of its
business or the occupation or use of the Premises;
"Excluded Lease" means the lease dated 1st December 1988 and
made between Scottish Amicable Life Assurance Society (1)
Sun International Exploration and Production Company Limited
(2) and the Company (3), which is registered at H.M. Land
Registry with Absolute Title under title number NGL631444
and which demised all those office premises at Block E,
Windsor Plaza, 80 Hammersmith Road, London W14 and all
agreements, deeds and other documents supplemental thereto,
and all obligations and liabilities relating thereto;
"Field" means an oil or gas field being one of the Fields
identified in Schedule 4, being referred to in that Part of
Schedule 4 which relates to the Licence in respect of the
area which wholly or partly comprises the Field;
"Field Group" means the parties to a JOA or, in the case of
a unitised Field, a UOA relating to a Field;
"FPV" means the floating production vessel known as the
"Balmoral", providing production facilities on the Balmoral
Field;
"Freehold Property" means the freehold property brief
details of which are set out in Part 1 of Schedule 5;
"Group" means the Company and the Subsidiaries;
<PAGE>
<PAGE> 9
"Guarantees" means all guarantees given by any member of the
Seller Group and provided in respect of obligations of the
Company or the Subsidiaries, and shall include all counter-
indemnities given by any member of the Seller Group and
provided in respect of guarantees provided by third parties
in respect of obligations of the Company or the
Subsidiaries, in each case as listed in Schedule 10;
"Hazardous Material" means any pollutant (whether relating
or arising out of any oil, gas derivative products or
otherwise) or any hazardous, toxic, radioactive, noxious,
corrosive or caustic substance whether in solid, liquid or
gaseous form;
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
"Information" has the meaning given in clause 4.3;
"Inter-Company Debt" means any principal owed, and any
interest accrued thereon, by each of the Company and the
Subsidiaries to any member of the Seller Group, and if any
such member makes a payment after the date hereof (which has
not been reimbursed by the Company or the Subsidiaries)
under a Guarantee then the amount of such payment shall, if
the same would not otherwise be the case, be treated as an
amount of the Inter-Company Debt provided that any payment
so made shall only be taken into account if it is disclosed
to Purchaser on or before Completion;
"Inter-Company Receivable" means any principal owed, and any
interest accrued thereon, by any member of the Seller Group
to the Company or the Subsidiaries;
"Interim Period" means the period from and including the
Economic Date up to and including the Completion Date;
"JOA" means the joint operating agreement currently in force
in respect of operations pursuant to a Licence, as amended,
supplemented and novated from time to time, and identified
as such in the relevant Part of Schedule 4;
"Leasehold Properties" means the leasehold properties brief
details of which are set out in Part 2 of Schedule 5;
"Leases" means the relevant lease or the underlease of each
of the Leasehold Properties and brief details of which are
set out in Part 2 of Schedule 5;
<PAGE>
<PAGE> 10
"Licence" means each or any of the licences of which details
are set out in Schedule 4;
"Licence Interest" means the undivided interest in a
Licence, together with the related percentage interest in
the JOA and any applicable UOA as set out in Schedule 4, and
the related percentage interest in any associated Pipeline
System and/or Terminal;
"Licence Operator" means, in relation to each of the
Licences, the entity appointed operator pursuant to the JOA
relating to that Licence, and, in the case of each Licence,
the current Licence Operator is identified in the relevant
Part of Schedule 4;
"Licensed Interest Documents" means those documents which
are, in relation to each Licence, listed in Appendix 1 to
the Disclosure Letter and, where the context so admits, any
one or more of such documents;
"Natural Gas" means natural gas or gas as defined in the
relevant gas sale agreements listed in Appendix 1 to the
Disclosure Letter;
"Net Working Capital" means the sum of the following amounts
at the Economic Date as shown in the Net Working Capital
Statement:
(a) the current assets (including the Inter-Company
Receivable) of the Group, less
(b) the current liabilities of the Group, less
(c) the Inter-Company Debt, less
(d) an amount of $3,420,000 in respect of deferred income
of the Group (irrespective of the amount included in
respect of deferred income in the Group's consolidated
balance sheet in the Accounts), less
(e) the amount payable by the Company by way of the
retention bonuses as referred to in clause 6.8(c) less
any amount which is deductible or otherwise capable of
being claimed as a relief by the Company in computing
its liability to Taxation on the basis that it is so
deductible or otherwise claimed in full;
<PAGE>
<PAGE> 11
"Net Working Capital Adjustment" means the difference
between the Preliminary Net Working Capital and the Net
Working Capital as shown in the Net Working Capital
Statement;
"Net Working Capital Statement" means the statement to be
agreed pursuant to clause 3.6 or determined pursuant to
clause 3.7 (as the case may be);
"Oil" means crude oil and other hydrocarbons produced at the
wellhead in liquid form and liquid hydrocarbons recovered or
extracted from gas;
"Operator" means where the context so admits any of or all
of the following:
(a) a Unit Operator;
(b) a Licence Operator;
(c) a Pipeline Operator; and/or
(d) a Terminal Operator;
"OPS Trust Deed" means a trust deed dated 17th August 1976
and entered into by London & Scottish Marine Oil Company
Limited, Scottish Canadian Oil & Transportation Company
Limited and Commercial Union Assurance Company Limited as
supplemented and amended by a First Supplemental Trust Deed
dated 24th February 1977;
"OTA 1975" means the Oil Taxation Act 1975;
"Party" or "Parties" means the parties to this Agreement;
"Pension Scheme" means the Sun Group (UK) Pension and Life
Assurance Plan (or the trustees from time to time of that
scheme ("Trustees") as the context requires);
"Pensionable Employee" means an employee of the Company at
Completion who is then in pensionable service under the
Pension Scheme;
"Petroleum" has the meaning ascribed to petroleum in the
Petroleum (Production) Act 1934 including (for the avoidance
of doubt) oil, liquid petroleum gas and gas;
<PAGE>
<PAGE> 12
"Pipeline Operator" means the entity appointed operator in
relation to a Pipeline System, and, in relation to each
Pipeline System, the current Pipeline Operator is identified
in the relevant Part of Schedule 4;
"Pipeline System" means a pipeline system through which
Petroleum produced from a Field is transported and which is
identified and described in that Part of Schedule 4 which
relates to the Licence in respect of the area which wholly
or partly comprises the Field;
"Pounds" or "Sterling" means pounds sterling of the United
Kingdom;
"Preliminary Net Working Capital" means the deficit of
$31,101,400 being the estimate as at the date hereof of the
Net Working Capital, as shown in the Preliminary Net Working
Capital Statement;
"Preliminary Net Working Capital Statement" means the
unaudited statement of the Preliminary Net Working Capital
set out in schedule 9;
"Premises" means the Freehold Property and the Leasehold
Properties;
"Proceedings" means any proceeding, suit or action arising
out of or in connection with this Agreement;
"Proposed Reorganisation" means any proposals from Purchaser
relating to the reorganisation of the Group as the same may
take place at any time after Completion including without
limitation, any transfer of all or part of the share capital
or assets of any member of the Group by Purchaser to any
Affiliate or Affiliates of Purchaser at such time or in
respect of a transfer of assets, to Purchaser;
"PRT" means Petroleum Revenue Tax as charged under the OTA
1975 and the Oil Taxation Act 1983 (as amended);
"Purchaser's Account" means Purchaser's Dollar Account No.
11153382 at Lloyds Bank plc, City International Branch,
London (Swift No. LOYDGB2LCTY);
"Purchaser's Accountants" means Price Waterhouse of No. 1
London Bridge, London SE1 9QL;
<PAGE>
<PAGE> 13
"Relevant Disputes and Agreements" means
(a) the dispute between the Ninian Field Group and the
Strathspey Field Group relating to the late start-up of
the services to be provided by the Ninian Field Group
to the Strathspey Field Group;
(b) the dispute between the Ninian Field Group and the
Staffa Field Group relating to send-or-pay charges
unpaid by the Staffa Field Group to the Ninian Field
Group;
(c) the dispute between the Alwyn South Field Group and the
Ninian Pipeline System Group relating to unpaid tariffs
for the period up to and including the Economic Date
for the transportation and processing of Alwyn South
fluids;
(d) the proposed agreement between the participants in the
Sullom Voe Terminal and the Shetland Islands Council
relating to the proposed extension of the occupation
and use of the Sullom Voe Terminal beyond 2000, such
agreement to provide for repayment of certain monies
paid to the Shetland Islands Council prior to the
Economic Date;
(e) the proposed "PIMS cascade" agreement to be entered
into by all participants in the Ninian Pipeline System
relating to the PIMS Heads of Agreement entered into on
30th November 1992 to the extent that the same gives
rise to rights, benefits, obligations or liabilities in
the period up to and including the Economic Date;
"Relevant Petroleum Proceeds" means, at any time, any amount
owing to the Company or a Subsidiary in respect of Oil sold
by the Company or a Subsidiary as mentioned in clause
4.1(b)(i) and delivered not more than thirty days before
that time;
"Royalty" means royalty as defined in section 12 of the Oil
Taxation Act 1975 payable pursuant to the terms of any
Licence;
"Sale Shares" means all shares of stock of the Company
issued at the date hereof, as set out in Schedule 1 and
constituting all of the issued share capital of the Company;
"Secretary" means the Secretary of State for Trade and
Industry;
<PAGE>
<PAGE> 14
"Securities and Exchange Commission" means the Securities
and Exchange Commission of the United States of America;
"Seller Group" means Seller and its Affiliates other than
the Company and the Subsidiaries;
"Seller's Account" means Dollar Account No. 100722 at
Citibank N.A. New York (ABA Number 021000089);
"SONSL" means Sun Oil North Sea Limited, as described in
Schedule 2A;
"the Subsidiaries" means SONSL and BSOC;
"Taxation" means all forms of taxation, duties, levies,
imposts, charges and withholdings, direct or indirect,
created or imposed by any taxing, fiscal or other
appropriate authority of the United Kingdom or elsewhere
except the United States of America, and (without prejudice
to the generality of the foregoing) includes:
(a) CT, advance corporation tax, PRT, Royalty, VAT, Income
Tax, PAYE and any other forms of taxation, duties,
levies, imposts, charges or withholdings similar to or
supplementing or replaced by or replacing the foregoing
or any of them; and
(b) all penalties, charges, interest, fines, costs and
expenses, loss of relief, allowance or credit relating
to any form of, or claim for, taxation or other
imposition referred to in paragraph (a);
"Taxation Authority" means the Internal Revenue Service, the
Inland Revenue, the US Customs Service, HM Customs & Excise
or any other revenue, customs or fiscal body or person,
whether of the United States of America, the United Kingdom
or elsewhere;
"Terminal" means a crude oil receiving, treatment, storage
and tanker loading complex, or a gas pumping and processing
complex used in relation to Petroleum produced from a Field
and which is identified and described in that Part of
Schedule 4 which relates to the Licence in respect of the
area which wholly or partly comprises the Field;
"Terminal Operator" means the entity appointed operator in
relation to a Terminal, and, in relation to each Terminal,
the current Terminal Operator is identified in the relevant
Part of Schedule 4;
<PAGE>
<PAGE> 15
"Translation Rate" means 1 pound:$1.5518;
"UKCS" means the United Kingdom Sector of the Continental
Shelf;
"Underleases" means those underleases of parts of the
Premises of which brief details are set out in Part 3 of
Schedule 5;
"Unit Operator" means the operator designated under and in
respect of a UOA, and, in relation to each UOA, the current
UOA Operator is identified in the relevant Part of Schedule
4;
"UOA" means a unit operating agreement currently in force in
relation to each unitised Field, as amended, supplemented
and novated from time to time and identified as such in the
relevant Part of Schedule 4;
"VAT" means Value Added Tax as charged under the Value Added
Tax Act 1994 (as amended); and
"Warranties" means the representations and warranties
referred to in clause 7.
"Waste" includes any unwanted or surplus substance whether
or not relating to or arising from the construction,
operation, decommissioning or abandonment of any oil or gas
related installation, vessel, terminal or pipeline.
1.2 All references to clauses, recitals and Schedules are,
unless otherwise expressly stated, references to clauses,
recitals and schedules to this Agreement.
1.3 The headings in this Agreement are inserted for convenience
only and shall be ignored in construing this Agreement.
Unless the context otherwise requires in this Agreement the
singular shall include the plural and vice versa.
1.4 Reference to statutory provisions shall be construed as
reference to those provisions as amended, consolidated,
extended or re-enacted from time to time.
1.5 Any document expressed to be "in the agreed form" means a
document in a form approved by (and for the purpose of
identification signed on behalf of) the Parties.
<PAGE>
<PAGE> 16
2 Sale and Purchase of the Sale Shares
------------------------------------
2.1 Subject to the terms of this Agreement, Seller hereby agrees
to sell with full title guarantee to Purchaser and Purchaser
hereby agrees to purchase from Seller the Sale Shares.
Purchaser shall be entitled to exercise all rights attached
or accruing to the Sale Shares including, without
limitation, the right to receive all dividends,
distributions or any return of capital declared, paid or
made by the Company on or after the Economic Date.
2.2 Seller waives all rights of pre-emption over any of the Sale
Shares conferred upon it by the articles of association of
the Company or in any other way and undertakes to take all
steps necessary to ensure that any rights of pre-emption
over any of the Sale Shares are waived.
2.3 Completion is conditional on fulfilment or waiver of the
following conditions:
(a) confirmation by the Secretary in form and substance
reasonably acceptable to Seller and Purchaser that it
would not be his intention, following the transactions
contemplated hereby, to require any further change of
control of the Company or the Subsidiaries pursuant to
that model clause (incorporated by reference into each
of the Licences) as is equivalent or comparable (in
relation to the licensing round during which each such
Licence was granted) to model clause 42(3) of Schedule
4 of the Petroleum (Production) (Seaward Areas)
Regulations 1988 as amended;
(b) confirmation from the Secretary in a form reasonably
satisfactory to Purchaser that it is not his intention
to refer the transaction contemplated by this Agreement
to the Monopolies and Mergers Commission under the Fair
Trading Act 1973; and
(c) confirmation from the relevant beneficiaries, in form
and substance satisfactory to Seller, that the
Guarantees will on Completion be released.
2.4 If any of the conditions set out in clause 2.3 are not
fulfilled or waived by 17.00 hours (London time) on 30th
September 1996 (or such later date as the Parties may
agree), or if prior thereto the Parties otherwise agree in
writing that some fact or circumstance exists which will
<PAGE>
<PAGE> 17
prevent the conditions from being so fulfilled, all
liabilities of the Parties hereunder shall cease and
terminate (except with regard to clauses 4.3 and 14) and
neither Party shall have any claim against the other
hereunder save in respect of such clauses or any prior
breach of clauses 2.5 or 2.7.
2.5 Purchaser shall use all reasonable endeavours to obtain the
fulfilment of the conditions set out in clause 2.3(b) and
2.3(c), and the Parties shall each use all reasonable
endeavours to obtain the fulfilment of the condition set out
in clause 2.3(a), in each case by 30th September 1996 (or
such later date as may be agreed as aforesaid). Each of the
Parties shall notify the other forthwith upon the
satisfaction of any of the conditions set out in clause 2.3
for which it is responsible. Each of the Parties shall
render such assistance and co-operation as may reasonably be
required by the other Party in order to enable or facilitate
the satisfaction or fulfilment by the first Party of the
relevant condition.
2.6 (a) Waiver of the condition in clause 2.3(a) shall require
the mutual consent of Seller and Purchaser;
(b) The condition in clause 2.3(c) shall be capable of
waiver by Seller acting alone and the condition in
clause 2.3(b) shall be capable of waiver by Purchaser
acting alone.
2.7 Each of the Parties undertakes to disclose in writing to the
other anything which will or may prevent any of the
conditions set out in clause 2.3 from being satisfied on the
date initially set for Completion as soon as reasonably
practicable after it comes to its notice.
2.8 Purchaser undertakes to Seller promptly to provide the
Secretary with all information properly requested by him
relating to Purchaser and its future intentions regarding
exploration for, and the development of, Petroleum in areas
comprised within the Licences and such other matters as the
Secretary may determine. Seller shall render Purchaser such
assistance and co-operation as Purchaser may require
relating to the provision of such information.
2.9 It is acknowledged by the Parties that Purchaser may seek to
obtain confirmation by the Secretary as referred to in
clause 2.3(a) above in respect of the Proposed
Reorganisation as well as in relation to the transaction
<PAGE>
<PAGE> 18
contemplated herein and at the same time as seeking such
confirmation and Seller shall, if requested by Purchaser,
provide Purchaser with reasonable assistance and cooperation
in relation to the obtaining of such confirmation.
3 Consideration
-------------
3.1 The consideration for the sale of the Sale Shares shall be
the payment by Purchaser to Seller of the sum of
$291,000,000 as adjusted pursuant to this Agreement in
accordance with the following provisions of this clause 3
(the "Consideration").
3.2 The amount specified in clause 3.1 shall be increased (or,
if the Net Working Capital is a deficit, decreased) by the
Net Working Capital.
3.3 (a) In addition to any adjustment made pursuant to clause
3.2 (subject as mentioned in paragraph (b) below), the
amount specified in clause 3.1 shall be decreased or
increased by amounts equal to any amount payable or
receivable (as the case may be) by the Company or a
Subsidiary (other than to or from another member of the
Group), as described below:
(i) decreased by any amount paid or payable or
increased by any amount received or receivable by
the Company in respect of the Interim Period, to
the extent that it relates to the Excluded Lease;
(ii) decreased by any amount paid by way of dividend
or other distribution by the Company in the
Interim Period (other than the dividend made by
SOBL to Seller on 1st July 1996 of the issued
share capital of Sun Oil Company (U.K.) Limited);
(iii) decreased by any amount paid or payable by the
Company or either of the Subsidiaries during the
Interim Period to any person (other than a member
of the Group) or any payment obligations incurred
during such period other than (i) in the ordinary
course of business or (ii) where Purchaser's
written consent has been obtained prior to such
payment or (iii) where such amount has already
been taken into account in determining the Net
Working Capital;
<PAGE>
<PAGE> 19
(iv) decreased by any amount paid or payable to any
member of Seller Group by way of management,
operating or similar charge (but excluding
insurance premium costs) during the Interim
Period to the extent that such charges in
aggregate exceed $35,000 per month; and
(v) decreased by any amount of interest paid or
payable by any member of the Group in respect of
the principal owing under the Inter-Company Debt
in respect of the Interim Period.
(b) Where any amount referred to in paragraph (a) above
relates to an item which can or should be taken into
account as a deduction or receipt in computing any
liability to Taxation of the Company or any one of the
Subsidiaries (but, in relation to corporation tax on
chargeable gains, only in relation to disposals, the
subject of paragraph (a) and only to the extent that
the computation produces a chargeable gain or allowable
loss), the same shall be reduced by the percentage
equal to the applicable percentage rate of the
appropriate tax (not being, in the case of corporation
tax, the small companies' rate) for the relevant
accounting period in which the amount in question
becomes payable or receivable (irrespective of whether
that is a period for which tax payable by the Company
or either of the Subsidiaries is in fact reduced or
increased by reference to the item or the amount
payable or receivable, and irrespective of the
availability of any other reliefs or allowances). In
relation to whether the provisions of this clause
3.3(b) apply:
(i) the Purchaser agrees to procure that, unless
Seller otherwise agrees in writing, the Group
shall prepare and submit any computations and
returns required for the purposes of the Group's
Taxation affairs as if they do so apply; and
(ii) in the event that any Taxation Authority queries
whether they do so apply, the provisions of clause
5 of the Deed of Tax Indemnity shall apply as if
such query were a Claim (as defined in the Deed of
Tax Indemnity).
(c) If pursuant to clause 3.3(b) it has initially been
assumed that an amount can or should so be taken into
account as a deduction or receipt and subsequently it
<PAGE>
<PAGE> 20
is finally determined not to be a deduction or receipt
in computing any liability to Taxation of the Company
or any one of the Subsidiaries, Seller shall promptly
pay to Purchaser an amount equal to the amount by which
the relevant item had been previously reduced.
If pursuant to clause 3.3(b), it has initially been
assumed that an amount cannot or should not be taken
into account as a deduction or receipt and subsequently
it is finally determined to be a deduction or receipt
in computing any liability to Taxation of the Company
or either of the Subsidiaries, Purchaser shall promptly
pay to Seller an amount equal to the amount by which
the relevant item would have been so reduced, if it had
been initially assumed to be a deduction or receipt.
Any payments pursuant to this clause 3.3(c) shall not
be regarded as Adjustments.
(d) Any adjustment to the amount specified in clause 3.1
required pursuant to the provisions of this clause will
be effected (and any payment made) in the manner
provided in the following sub-clauses.
Estimate of Adjustments
-----------------------
3.4 Seller shall provide Purchaser with a written statement
setting out the sum of the Preliminary Net Working Capital
and an estimate of all Adjustments which are expected to be
required by clause 3.3 together with an estimate of the
amount payable equivalent to interest in accordance with
clause 3.9. Such statement shall be provided as soon as
practicable, but in any event no less than three Business
Days, prior to Completion. Prior to Completion, Seller may
update the same and the Parties shall, without prejudice to
clause 3.7, endeavour to agree such estimates before
Completion, failing which the matter shall be dealt with in
accordance with clauses 3.5 and 3.7. Seller shall provide
Purchaser (and its advisers) with such evidence in respect
of such estimates as Purchaser may reasonably require,
including access to relevant employees of the Company in
order to obtain further information in respect of such
estimates.
3.5 If any of the amounts or portions of such estimates to be
delivered pursuant to clause 3.4 have not been agreed prior
to Completion, the disputed amounts or portions of the
Adjustments shall be left out of account, and the undisputed
<PAGE>
<PAGE> 21
Dollar balances of the Adjustments shall be set off against
each other.
The resultant balance shall be added to, or subtracted from
(as the case may be), the amount stated in clause 3.1, and
such amount so adjusted shall be payable at Completion.
Payment of disputed amounts or portions thereof shall be
made within five Business Days following agreement of the
Parties or determination under clause 3.7.
3.6 The Accounts and Final Adjustments
----------------------------------
(a) (i) As soon as practicable after the date hereof but,
in any event, within 60 days after the Economic
Date Seller shall procure that the Accounts are
prepared by the Company and audited by the
Auditors in accordance with this clause 3.6 and
submitted to Purchaser together with a statement
prepared by Seller in the form set out in
Schedule 9, showing the Net Working Capital in
both Sterling and Dollars (such statement being
extracted from the Accounts save as otherwise
provided in this Agreement).
(ii) Within 15 days after Completion Seller shall
submit to Purchaser a revised statement of the
Adjustments (if any) required to be made pursuant
to clause 3.3.
(iii) Any amounts required to be included in the
statements referred to in paragraphs (i) and (ii)
which are denominated in Pounds shall be
translated into Dollars at the Translation Rate.
(b) The Accounts shall consist of a balance sheet, profit
and loss account and notes for the Company and each of
the Subsidiaries together with a consolidated balance
sheet of the Group as at close of business on the
Economic Date and a consolidated profit and loss
account of the Group in respect of the period from 1st
January 1996 to the Economic Date (both dates
inclusive).
(c) The Accounts shall:
(i) be prepared under the historical cost convention
and in accordance with the requirements of
generally accepted accounting practices and
<PAGE>
<PAGE> 22
principles, Statements of Standard Accounting
Practice and Financial Reporting Standards in the
United Kingdom as of the Economic Date
consistently applied and, subject to the
foregoing
(ii) show a true and fair view of the state of affairs
of the Company and the Subsidiaries at the
Economic Date and the profit (or loss) of the
Company and the Subsidiaries for the period from
1st January 1996 to the Economic Date and in the
case of the consolidated financial statements
show a true and fair view of the state of affairs
of the Group as a whole at the Economic Date
(and, for the avoidance of doubt, inventories
shall be classified as fixed assets for the
purposes of the Accounts) and, subject to the
foregoing
(iii) apply and adopt the same bases and policies of
accounting as applied or adopted for the audited
consolidated accounts of the Company and SONSL as
at 31st December, 1995 PROVIDED THAT where those
bases and policies are inconsistent with those
referred to in paragraph (i), the bases and
policies referred to in paragraph (i) shall
prevail, PROVIDED FURTHER THAT notwithstanding
any of the foregoing an amount of $13,286,500
attributable to monies received by the Company
under contracts for the sale of gas where the
corresponding quantity of gas has not been
delivered thereunder shall be treated as
"deferred income" and not as a "current
liability" notwithstanding that it was treated as
such in the audited consolidated accounts of the
Company and SONSL for the year ended 31st
December 1995 PROVIDED FURTHER THAT in relation
to any current (and not deferred) liability of
the Company or the Subsidiaries to PRT or
corporation tax, the Accounts will only take
account of such liabilities to the extent that
such liabilities are expected to be payable;
(iv) treat any amount of advance corporation tax not
estimated as being capable of set off against any
liability to corporation tax of the Group for
accounting periods up to and including the
Economic Date as an offset against deferred taxes
for the purposes of the Accounts.
<PAGE>
<PAGE> 23
(v) shall translate all sums denominated in Pounds
into Dollars at the Translation Rate.
(d) (i) Unless Purchaser shall notify Seller in writing
within 30 days after Completion that it does not
accept that the Accounts and the Statements
delivered under sub-clause 3.6(a)(i) and (ii)
(together "the Adjustment Documents") are
correct, Purchaser shall be deemed to have
accepted the correctness of all such documents
for the purpose of determining the Consideration.
(ii) If, within the period of 30 days after Completion
Purchaser shall notify Seller in writing that it
does not accept the correctness of any of the
Adjustment Documents in any respect the Parties
shall use their best endeavours to reach
agreement upon any adjustments required to the
Accounts and/or either of the statements to meet
the objections of the Purchaser.
(iii) If the Parties are unable to reach agreement as
aforesaid within 15 days of the notification
referred to in paragraph (ii) the provisions of
clause 3.7 shall apply.
(iv) If Purchaser accepts or is deemed to accept that
the Adjustment Documents are correct the
Adjustment Documents as so accepted or, as
determined pursuant to clause 3.7 shall be final
and binding on the Parties for the purpose of
determining the Consideration.
(e) Within 7 days following agreement, deemed agreement or
determination of the Adjustment Documents:
(i) Seller shall pay to Purchaser (if the Net Working
Capital is a greater negative amount than the
Preliminary Net Working Capital) or Purchaser
shall pay to Seller (if the Net Working Capital
is a smaller negative amount than the Preliminary
Net Working Capital) by way of adjustment to the
amount specified in clause 3 the Net Working
Capital Adjustment; and
(ii) Seller shall pay to Purchaser or, as the case may
be, Purchaser shall pay to Seller, any amount
payable under clause 3.3 (as shown in the
<PAGE>
<PAGE> 24
statement delivered under sub-clause 3.6(a)(ii)
as so agreed or determined) to the extent not
already paid or taken into account on Completion.
Any amount not so paid shall carry interest at the
Agreed Rate plus 3% from the due date until the date of
actual payment (as well after judgment as before).
Independent determination
-------------------------
3.7 If the Parties cannot reach agreement on the contents of all
or part of the Adjustment Documents within the time limit
provided in clause 3.6(d)(iii), the disputed items may be
referred by either Party for determination by an independent
chartered accountant nominated by the Parties or, in the
absence of agreement between the Parties within five
Business Days of a Party notifying the other that it
proposes to refer the dispute to an expert, by the President
of the Institute of Chartered Accountants in England and
Wales. Subject to clause 4.3, the nominated chartered
accountant shall be afforded such access to books, records,
accounts and documents in the possession of each of the
Parties as he may reasonably request, and he shall act as
expert not as arbitrator. The said accountant's
determination shall, in the absence of fraud or manifest
error or bias, be final and binding on the Parties, his fees
and disbursements shall be borne by the Parties in equal
shares and the Parties shall bear their own costs in respect
of such reference.
3.8 Seller shall provide Purchaser with copies of all relevant
documentation in support of the Adjustment Documents and
shall liaise with Purchaser on the compilation and agreement
of the Adjustment Documents. Purchaser shall, and shall
procure that the Company shall, render Seller all assistance
reasonably required for the preparation, compilation and
agreement of the Adjustment Documents.
Time-Value Adjustments
----------------------
3.9 (a) There shall be payable by Purchaser to Seller,
(i) an amount equivalent to interest calculated at
the Agreed Rate from the Economic Date up to and
including the Completion Date on the amount
specified in clause 3.1 less the amount of the
<PAGE>
<PAGE> 25
Preliminary Net Working Capital and any amount
deducted at Completion from the amount specified
in clause 3.1 in respect of the Adjustments
specified in clause 3.3,
less
(ii) if and to the extent that the Inter-Company
Receivable exceeds the Inter-Company Debt an
amount equivalent to interest calculated at the
Agreed Rate on the amount which is one half of
the sum of the amount of such excess on the first
day of a Calculation Period and the amount of
such excess on the last day of that Calculation
Period, for each Calculation Period commencing on
the date hereof.
(b) In respect of the Adjustments Seller or Purchaser (as
the case may be) shall pay:
(i) an amount equivalent to interest at the Agreed
Rate on the Net Working Capital Adjustment from
the Economic Date up to and including Completion,
and, in the case of disputed items, up to and
including the date of settlement thereof; and
(ii) an amount equivalent to interest at the Agreed
Rate on each amount payable or receivable under
clause 3.3(a) (adjusted in accordance with clause
3.3(b)) from the date of the payment or receipt
thereof by any member of the Group up to and
including the Completion Date or, in the case of
disputed items, up to and including the date of
settlement thereof.
(c) If and to the extent that any amount equivalent to
interest (whether paid in respect of amounts taken into
account at Completion or in respect of amounts settled
thereafter, as provided in this clause 3.9) is or is
treated as interest for the purposes of Taxation, such
amounts shall be treated as short interest and no
deduction shall be made therefrom.
(d) Notwithstanding any of the foregoing, the maximum
aggregate amount payable by Purchaser to Seller
pursuant to this clause 3.9 shall be $2,000,000.
3.10 If at the time when the Parties shall seek to determine the
Adjustments pursuant to clause 3.4, either Party notifies
<PAGE>
<PAGE> 26
the other that an item not referred to in the definition of
"Net Working Capital" should be so included ("a Relevant
Item"), the Parties shall seek to agree the treatment of
such item provided that if the Parties shall fail so to
agree within 14 Business Days of such notice, clause 3.7
shall apply, mutatis mutandis save that the words "on the
content of all or part of the Adjustment Documents within
the time limit provided in clause 3.6(d)(iii)" in clause 3.7
shall be replaced by the words "on the treatment of a
Relevant Item within the time limit provided in clause
3.10".
3.11 The provisions of clause 3.3(b) and 3.3(c) shall apply
mutatis mutandis to the retention bonuses referred to in
paragraph (e) of the definition of "Net Working Capital"
assumed to be deductible or otherwise capable of being
claimed as a relief in computing the Company's liability to
Taxation.
4 Interim Period
--------------
4.1 During so much of the Interim Period as falls after the date
hereof, Seller shall
(a) (i) ensure that subject to any limitations imposed by
the terms of any of the Licensed Interest
Documents, as to which Seller shall request the
relevant parties thereto to release or waive such
limitation if requested by Purchaser, Purchaser
and any person authorised by it shall be given
full access at reasonable times to the Premises
and all Data (whether in the possession or
control of the Company and the Subsidiaries at
the date hereof or as such Data comes into the
possession or control of the Company and the
Subsidiaries during the Interim Period), title
deeds, books and records, directors, employees
and assets of the Company and the Subsidiaries,
and the directors and employees of the Company
and the Subsidiaries shall give promptly all such
information and explanations as Purchaser may
reasonably request (to the extent within their
knowledge);
(ii) Seller and Company shall give the Purchaser and
its representatives access (as Purchaser may
reasonably request) to personnel of Seller's
<PAGE>
<PAGE> 27
Group and the Group and so far as it is able
personnel at Brown & Root Limited (which shall
include where relevant, attendance by a
representative of Purchaser (with no right to
speak unless invited to do so) at external or
internal meetings) in order to enable Purchaser
to understand the operations and business of the
Group, whether in connection with the transaction
contemplated by this Agreement, the Proposed
Reorganisation, the operation of the relevant JOA
and UOA or otherwise;
(b) the Company and the Subsidiaries shall:
(i) continue to arrange liftings and make sales of
Oil to Sun International Limited on the terms
set out in agreements respectively between the
Company and Sun International Limited and SONSL
and Sun International Limited each effective the
first day of January 1994, and (to the extent
within their reasonable control) to make sales
and deliveries of Natural Gas on the terms of
the gas sales agreements subsisting at the date
hereof true copies of which were contained in
the Data Room;
(ii) prior to any meeting of the relevant operating
committee or sub-committee under any JOA or UOA
or any material decision relating to any of the
Licensed Interests (which shall be deemed to
include, without limitation, the approval of or
amendment to any abandonment plan, development
plan, work programme or budget, the incurring of
any expenditure outside any budget (save in the
case of an emergency), give such notice to
Purchaser as shall be reasonably practicable in
relation to such matter and thereafter consult
Purchaser and take account of any
representations which Purchaser may make in
relation to voting at such meeting (but without
limiting the discretion of the Company or the
relevant Subsidiary in relation to such voting);
(iii) allow, subject to consent by any relevant party
to any JOA or UOA Document, Purchaser to attend
(but not speak unless invited to do so) any
meeting of the relevant operating committee or
sub-committee relating to that JOA or UOA for
the purposes specified in paragraph (ii);
<PAGE>
<PAGE> 28
(iv) not (by act or omission) breach in any material
respect any of the provisions of the Licensed
Interest Documents (and will notify Purchaser in
a timely manner of any facts or circumstances of
which they are aware which indicate that there
has been or is likely to be a material breach by
any other party or that a material breach by the
Company or the Subsidiaries has occurred);
(v) (subject to any obligations of confidentiality
and any agreement with a third party by which it
is bound) make available or allow Purchaser
access to all information, Data and other
material reasonably requested by Purchaser from
time to time relating to the Company and the
Subsidiaries, and to the Licences, Licensed
Interest Documents and operations conducted
thereunder;
(vi) keep Purchaser informed in a timely manner of
all matters (other than those of a minor or
routine nature) relating to the Company's and
the Subsidiaries' business and affairs and
invite Purchaser to attend board or committee
meetings, and take account of Purchaser's
reasonable requests;
(vii) use best endeavours to complete the re-
certification of the FPV in accordance with the
appropriate requirements (such endeavours to
include the taking of all action which is within
the control of Seller or the Company); and
(viii) render assistance and co-operation as Purchaser
may reasonably request in informing any relevant
third party (including, without limitation,
parties to any JOA or UOA or the Secretary
(where relevant)) of the Proposed Reorganisation
and in obtaining such parties' consent (where
relevant) to the Proposed Reorganisation;
(c) the Company and the Subsidiaries shall not enter into
or become party to any new licences, operating
agreements, farm-in or farm-out agreements, unitisation
agreements, transportation agreements, oil or gas sale
or supply agreements or any other agreement or under-
taking (by whatever name called) or trade or deal with
(including, without limitation, relinquishing,
<PAGE>
<PAGE> 29
surrendering, selling, assigning or amending) the
interests of the Company or the Subsidiaries in the
Licences without the prior written approval of
Purchaser (not to be unreasonably withheld or delayed)
or amend any existing contracts in any material
respect;
(d) the Company and the Subsidiaries shall not approve any
work programme, budget, expenditure or capital commit-
ment relating to any Licence involving the Company or
any Subsidiary in expenditure in excess of 250,000
pounds or, in the case of any JOA or UOA involving all
parties to that JOA or UOA (including the Company or
any Subsidiary), in expenditure which in aggregate
exceeds 250,000 pounds, in any case other than
(i) any such expenditure covered by any budget
approved prior to the date of this Agreement
either by the Company or the relevant Subsidiary
or pursuant to the provisions of any JOA, UOA or
other Licensed Interest Document and disclosed
to Purchaser under the terms of the Disclosure
Letter;
(ii) any such expenditure in respect of which
Purchaser has given its prior written approval
(not to be unreasonably withheld or delayed); or
(iii) any expenditure necessitated by any emergency
concerning the health or safety, preservation or
maintenance of property (in which case Seller
shall consult with Purchaser to the extent
practicable in the circumstances);
PROVIDED THAT Seller shall not be in breach of its
obligations under this paragraph (d) if any such
expenditure is approved pursuant to the terms of any
relevant Licensed Interest Document if the Company or
any relevant Subsidiary shall not have approved such
expenditure and shall have indicated its opposition to
the same;
(e) without prejudice to the generality of paragraph (c)
above, neither the Company nor the Subsidiaries shall,
without the prior written consent of Purchaser (which
<PAGE>
<PAGE> 30
in the case of (x) below shall not be unreasonably
withheld or delayed):
(i) create or issue any shares of stock or loan
capital or grant any option in respect of any of
its stock or loan capital or any of the stock or
loan capital of any company which is its
subsidiary;
(ii) create, extend, grant or issue any mortgage,
charge, debenture or other securities over any
of its assets (including the Licence Interests)
or create any royalty or net profit interest or
net production interest over any of the Licences
Interests;
(iii) declare, make or pay any dividend or other
distribution of profit;
(iv) enter into any contract or arrangement (other
than as required by the transactions
contemplated hereby) outside the ordinary course
of business or, in respect of any contract or
arrangement in the ordinary course of business
other than on arm's length terms;
(v) make a material change in the nature of, or
cease carrying on, its business;
(vi) pass any resolution of its members in general
meeting or make any alterations to its articles
of incorporation and bylaws or memorandum and
articles of association (as the case may be);
(vii) dispose (in any manner whatsoever) of any of the
Licences or of any interest therein;
(viii) permit any liens to arise on any of its assets,
otherwise than in the ordinary course of
business; or
<PAGE>
<PAGE> 31
(ix) write off or release any debts;
(x) propose, participate in or approve any sole risk
operations in respect of any of the Licensed
Interests;
(xi) make any borrowings (other than through the
operation of the Inter-Company Debt);
(xii) waive, release or modify its rights under any
Licensed Interest Document; or
(xiii) settle or compromise any outstanding dispute or
proceedings or otherwise waive any legal right
against third parties (other than the Relevant
Disputes and Agreements or in respect of the
agreements specified in clause 6.5(a)(vii));
(f) the Company and the Subsidiaries will conduct their
business in the ordinary course and in a proper and
prudent manner and in accordance with good oil field
practice and shall (without limitation) continue to
meet all expenditure (including insurance costs) and
receive all income in respect of the Licensed
Interests;
(g) in respect of such policies of insurance as are
maintained by the Company and/or the Subsidiaries and
are in force at the date hereof, the Company and the
Subsidiaries or, where applicable, a member of the
Seller Group shall maintain in full force and effect
such policies of insurance, shall pay all premiums
falling due for payment by the Company or the
Subsidiaries or, where applicable, a member of the
Seller Group in respect thereof, and shall make and
pursue all claims which can be made under such policies
in respect of any loss or damage but so that any
deductible arising under any such policy in respect of
any claim occurring or arising during the Interim
Period shall be for the account of the Company and/or
the Subsidiaries and none of the Purchaser, the Company
or the Subsidiaries shall have any claim or other right
against Seller in respect of such deductible under this
Agreement. Seller shall procure that, following
termination of such insurance on the Completion Date,
there shall be rebated to the Company and/or the
Subsidiaries so much of the premiums paid or borne by
them as it receives by way of reimbursement as a result
of early termination; and
<PAGE>
<PAGE> 32
(h) no new employee will be engaged by the Company or any
of the Subsidiaries except in the ordinary and proper
course of business and on terms which, when considered
overall, as far as practicable would be similar to
those applicable to existing employees carrying out the
same functions or of the same seniority and no Employee
will be dismissed except in the ordinary course of
business.
4.2 (a) Without prejudice to clause 4.1, Seller shall (subject
to any confidentiality obligations by which it is
bound) ensure that, pending Completion, Purchaser is
kept fully informed in a timely manner, and is fully
consulted in relation to, all material matters in
relation to the Licence Interests, including, but not
limited to:
(i) the making of any cash call;
(ii) the approval of any AFE;
(iii) the adoption or proposal of, or amendment to,
any work programme and budgets;
(iv) the receipt of any Operators' billing statements
and invoices;
(v) the receipt of any Data.
(b) To the extent that Seller is restricted, as a result of
confidentiality obligations binding on it or on the
Company or the Subsidiaries from procuring that
Purchaser is kept fully informed as aforesaid, or from
giving it access to information or documentation as
referred to in clause 4.1 above, Seller shall use all
reasonable endeavours to remove such restriction,
whether by seeking from the party or parties to whom
such obligations of confidentiality are owed a waiver
of its or their rights, or otherwise. If any costs or
charges would be payable to any third party in respect
of the lifting of any confidentiality restriction in
its favour, Seller shall so notify Purchaser and
Purchaser shall, if it wishes Seller to proceed, hold
Seller harmless against such costs or charges.
<PAGE>
<PAGE> 33
4.3 Prior to Completion, Purchaser shall hold in confidence all
information furnished or disclosed to Purchaser by Seller in
connection with the transactions contemplated by this
Agreement as well as all information concerning the Group
and the Licence Interests contained in any analyses,
compilations, studies or other documents and any business
and/or commercial information in respect of Seller and any
information acquired by the financial controller of
Purchaser referred to in clause 4.5 (collectively, the
"Information"). However, the undertaking of confidentiality
above shall not extend to any Information which is:
(a) generally available to the public other than as a
result of a wrongful disclosure by Purchaser; or
(b) available to Purchaser as owner of or otherwise
entitled to such information without any restriction on
disclosure; or
(c) available to Purchaser on a non-confidential basis from
a source other than Seller if such source is entitled
to disclose such information; or
(d) lawfully requested by a Government agency or any court
of competent jurisdiction, or is required to be
disclosed by regulation of any recognised stock
exchange or the Securities and Exchange Commission or
other similar body; or
(e) already in the possession of Purchaser otherwise than
as a result of a breach of an obligation of
confidentiality by a third party of which Purchaser is,
or ought reasonably to have been, aware.
Purchaser shall not, without the prior written consent of
Seller (which shall not be unreasonably withheld or
delayed), release or disclose any Information to any other
person, except to Purchaser's or its Affiliates' officers,
directors, employees, accountants, lawyers, representatives,
agents, consultants and financial advisers who need to know
the Information in connection with the implementation or
financing of the transactions contemplated by this Agreement
and the Proposed Reorganisation, who are informed by
Purchaser of the confidential nature of the Information and
who Purchaser will ensure will observe the terms and
conditions of this clause 4.3 without the benefit of this
exception.
<PAGE>
<PAGE> 34
4.4 (a) If Completion does not take place for any reason
provided for in this Agreement Purchaser shall remain
bound by clause 4.3, notwithstanding any termination of
this Agreement, until the earlier of the tenth
anniversary of such termination or such time as it has
entered into a separate undertaking of confidentiality
on the same or similar terms in respect of the
Information (and this clause 4.4 shall also survive
until such time).
(b) If this Agreement is terminated as aforesaid, Purchaser
shall, at the request of Seller and at Seller's cost,
promptly return to Seller (and delete from Purchaser's
systems, where electronically stored) all the
Information save where any of the exceptions set out in
paragraphs (a) to (e) in clause 4.3 applies.
4.5 Following the date hereof and until Completion:
(a) Purchaser shall be entitled to place a financial
controller employed by Purchaser with the Company for
the purpose of familiarising himself with the financial
systems and operations of the Company and of monitoring
the financial transactions of the Company (but so that
such financial controller shall have no right or
ability to transact business on behalf of the Company
or to prevent any such transactions from being carried
out); and
(b) Seller shall procure that the Auditors shall, so far as
practicable, liaise with the Purchaser's Accountants
and provide them with access to all working papers used
in auditing the Accounts.
4.6 If, during the Interim Period, Purchaser shall in the course
of carrying out such due diligence as Purchaser shall
consider appropriate by way of searches, enquiries,
inspections and title investigation and during the Interim
Period shall notify Seller of any matter ("Relevant Property
Defect") (other than the Underleases) which in the
reasonable opinion of Purchaser adversely affects the open
market value by more than 10% or affects the marketability
or prevents the current use of all or any part of the
Freehold Property and those of the Leasehold Properties
known as Sun Oil House, 20-25 Union Terrace, Aberdeen and 6-
14 North Silver Street, Aberdeen or any one of such
properties and which Relevant Property Defect has not been
specifically disclosed to Purchaser in the Disclosure Letter
then Seller shall (if the Relevant Property Defect is
<PAGE>
<PAGE> 35
reasonably capable of remedy) at its expense use its best
endeavours to remedy the same and in any event clause 7.6(b)
to (e) (inclusive) shall apply mutatis mutandis save that
reference to "Inconsistency" in such clause shall be
construed as reference to "Relevant Property Defects",
provided that this clause shall not apply in respect of any
matter relating to the design or construction of any
buildings on such of the Leasehold Properties.
4.7 For the purpose of clause 4.6 the current use of the
Freehold Property is as a car park and the current use of
the two Leasehold Properties specified therein is as
offices.
5 Completion
----------
5.1 Completion under this Agreement shall take place on the
tenth Business Day after the last of the conditions referred
to in clause 2.3 has been fulfilled or waived, at such
location and time as the Parties shall agree or, failing
such agreement not less than five Business Days prior to the
Completion Date, at the offices of Norton Rose, Kempson
House, Camomile Street, London EC3A 7AN at 10am.
5.2 On the Completion Date, save as provided in clause
5.2(a)(iii)(kk) all but not part only of the following
business shall be transacted:
(a) Seller shall:
(i) deliver to Purchaser (to the extent not already
delivered prior to Completion) a copy of the
relevant consents, approvals, clearances and
confirmations referred to in clause 2.3 and
obtained by or on behalf of Seller;
(ii) deliver to Purchaser a copy, certified as a true
copy and in full force and effect as at
Completion by the Corporate Secretary or a Vice-
President (or other officer of equivalent
status) of Seller, of a resolution of the board
of directors of Seller authorising its entry
into this Agreement and the Deed of Tax
Indemnity and the transactions contemplated
hereby and authorising a person or persons to
sign this Agreement and the Deed of Tax
Indemnity on behalf of Seller; and
<PAGE>
<PAGE> 36
(iii) deliver to Purchaser:
(aa) duly executed transfers in respect of
the Sale Shares and of any shares in the
Subsidiaries not registered in the name
of the Company, duly completed in favour
of Purchaser or as it may direct
together with share certificates in
respect of the issued share capital of
the Company and each of the
Subsidiaries;
(bb) such other documents as may be required
to give a good title to the Sale Shares
and to enable Purchaser to become the
registered holder thereof;
(cc) all the statutory and minute books of
the Company and the Subsidiaries
(written up to the Business Day
immediately preceding the Completion
Date) and their common seals (if any),
Certificates of Incorporation (including
any Certificate of Incorporation on
Change of Name) and books of account;
(dd) the written resignations of the
Directors and the Secretary of the
Company and of the Subsidiaries, save as
may be nominated in writing by Purchaser
prior to the Completion Date (subject to
such nominee consenting to continue in
office), executed under seal in the form
set out in Schedule 7 acknowledging that
they have no claim against any such
company in respect of the termination of
their office or employment or otherwise;
(ee) written confirmation from Seller that
there are no subsisting guarantees or
indemnities given by either of the
Company or the Subsidiaries for the
benefit of Seller or any other member of
the Seller Group; and
(ff) the Deed of Tax Indemnity duly executed
by Seller;
<PAGE>
<PAGE> 37
(gg) the title deeds to the Premises and to
the Underleases;
(hh) bank statements for each account
maintained by the Company and each of
the Subsidiaries made up to the date
being two Business Days before
Completion; and
(ii) a legal opinion signed by the Assistant
General Counsel of Seller updating the
legal opinion given by him to Purchaser
at the time of execution of this
Agreement in a form reasonably
satisfactory to Purchaser; and
(jj) agreements, duly executed by each of the
Company and SONSL and Sun International
Limited, in the agreed form, terminating
the agreements referred to in sub-clause
4.1(b)(i) with effect from the
Completion Date;
(kk) an unconditional deed of release of the
Company as the original guarantor of the
tenant under the Excluded Lease duly
sealed by the landlord but so that if
Seller shall fail to deliver such deed,
clause 5.5 shall apply; and
(ll) a certified copy of the executed
transfer by the Company to Sun Oil
Company (U.K.) Limited of the Excluded
Lease and of the relevant landlord's
consent for such transfer;
(mm) evidence reasonably satisfactory to
Purchaser of the release of the
mortgages and charges registered at
Companies House against BSOC as the date
hereof;
(iv) repay, or procure that there is repaid by any
other member of the Seller Group, to the Company
and the Subsidiaries any Inter-Company
Receivable, other than any amount of Inter-
Company Receivable being Relevant Petroleum
Proceeds (which shall be paid to the Company or
the Subsidiaries thirty days after the relevant
delivery of Oil in accordance with its terms)
<PAGE>
<PAGE> 38
and Seller hereby irrevocably and
unconditionally guarantees the repayment by any
other member of the Seller Group as provided in
this sub-clause (iv).
(b) Seller shall ensure that, at meetings of the directors
of the Company and of the Subsidiaries held at
Completion, the directors shall resolve:-
(i) in the case of the Company, that each of the
transfers relating to the Sale Shares shall be
approved for registration and (subject only to
the transfers being duly stamped) Purchaser
registered as the holder of the Sale Shares
concerned in the register of members;
(ii) that such action as may be required in the
jurisdiction in which the Company and each of
the Subsidiaries is incorporated be taken so
that the accounting reference date of each such
company shall be changed in accordance with any
instructions given by the Purchaser;
(iii) to appoint as additional directors of the
Company and the Subsidiaries, respectively,
effective on and from Completion, the persons
nominated in writing by Purchaser, and upon such
appointments the persons referred to in clause
5.2(a)(iii)(dd) above shall cease to be
directors of the Company and of the
Subsidiaries;
(iv) that such resolutions shall be delivered to
Purchaser at Completion;
(v) that such firm of chartered accountants as
Purchaser shall nominate not less than five
Business Days prior to Completion shall be
appointed statutory auditors of the Company and
the Subsidiaries in place of the Auditors (whose
resignation acknowledging that they have no
claim against the Company or any Subsidiary
shall be deposited at the registered office of
each such company as appropriate in accordance
with section 392 Companies Act 1985 together
with a statement under section 394 of that Act);
<PAGE>
<PAGE> 39
(vi) that the situation of the registered office of
each of the Company and the Subsidiaries shall
be changed to such addresses in Delaware or, as
the case may be, England and Wales as shall be
nominated by Purchaser; and
(vii) that the existing mandates relating to the bank
accounts of the Company set out in Schedule 1
shall be revoked and new mandates, as specified
by Purchaser prior to Completion, adopted.
(c) Purchaser shall, after receipt from Seller of all the
documents referred to in (a) above;
(i) pay to Seller the amount specified in clause 3.1
as adjusted in accordance with clause 3 together
with amounts equivalent to interest pursuant to
clause 3.9, by means of telegraphic transfer in
same day funds to the relevant Seller's Accounts
for value in Dollars and/or Sterling (as the
case may be) on such Completion Date;
(ii) deliver to Seller (to the extent not already
delivered prior to Completion) a copy of the
relevant consents, approvals, confirmations and
releases referred to in clause 2.3 and obtained
by or on behalf of Purchaser;
(iii) deliver to Seller a copy, certified as a true
copy and in full force and effect as at
Completion by a director or the secretary of
Purchaser, of a resolution of the board of
directors of Purchaser authorising its entry
into this Agreement and the transactions
contemplated hereby and authorising a person or
persons to sign the same on behalf of Purchaser;
(iv) deliver to Seller the Deed of Tax Indemnity duly
executed by Purchaser; and
(v) ensure repayment by the Company and the
Subsidiaries of all Inter-Company Debt
outstanding immediately after Completion.
(d) Seller and Purchaser shall and shall, if appropriate,
ensure that their respective Affiliates shall execute
such other documents and do all such other acts and
<PAGE>
<PAGE> 40
things as may reasonably be required, in order to
effect the disposal of the Sale Shares by Seller to
Purchaser and to implement the transactions
contemplated hereunder and otherwise to carry out the
transactions contemplated in this Agreement.
(e) Purchaser undertakes to ensure that, upon the
completion Date, the names of the Company and the
Subsidiaries shall be changed, and undertakes that
thereafter neither the Company, the Subsidiaries,
Purchaser nor any Affiliate of Purchaser shall use the
name "Sun" or any name likely to be confused therewith,
or use any logo or mark used by the Group or the Seller
Group prior to Completion.
5.3 Without prejudice to its obligations under clause 4, Seller
shall ensure that (to the extent not delivered prior to
Completion) the Licensed Interest Documents and all Data in
the possession or control of the Company, the Subsidiaries
or any member of the Seller Group prior to the Completion
Date (or copies thereof, if originals are not in such
companies' possession) are made available for collection by
Purchaser at its own expense and within normal business
hours as soon as reasonably practicable after the Completion
Date, but in any event within ten Business Days thereof and
pending such delivery the Seller shall ensure that the same
be kept safe and maintained in strict confidence.
5.4 Purchaser acknowledges that Seller shall have the right to
retain copies of any of the Licensed Interest Documents,
Data and other financial and fiscal information relating to
the Licence Interests and the Group for the purposes of
compliance with the requirements of any legal, fiscal and
regulatory authorities or for the conduct of the Relevant
Disputes and Agreements or otherwise in connection with this
Agreement, subject to the same being kept safe and
maintained in confidence. The provisions of clause 4.3
shall apply to Seller in the same way as they apply to
Purchaser and provided further that Seller undertakes to
destroy such copies and to delete from the Seller's systems
where electronically stored) as soon as such information is
no longer required or likely to be required for the purposes
referred to above and to notify Purchaser when the same has
been so destroyed or deleted.
5.5 If Seller shall fail to deliver the deed referred to in
clause 5.2(a)(iii)(kk) ("the Deed") to Purchaser at
Completion, Purchaser shall be entitled to withhold from the
<PAGE>
<PAGE> 41
amount payable to Seller under clause 5.2(c)(i), the sum of
1,300,000 pounds (translated into Dollars at the Translation
Rate) by way of security for the indemnity provided by
Seller in respect of the Excluded Lease under clause 6.3.
Purchaser shall only be obliged to release such sum (or, if
less, the amount thereof after deduction of any agreed or
settled claims made under such indemnity) upon delivery by
Seller of the Deed or upon the earlier termination of the
Excluded Lease in accordance with its terms or the
expiration of the Excluded Lease.
6 Post-Completion Matters
-----------------------
Tax compliance
--------------
6.1 (a) Seller or its authorised agents shall, at Seller's own
cost, prepare, (subject to paragraph (b) below) submit
and agree the computations and returns required for the
purposes of the Company's Taxation affairs for all
accounting periods for the purposes of CT, chargeable
periods for the purposes of PRT and prescribed
accounting periods for the purposes of VAT ending on or
before the Economic Date ("the Previous Accounting
Periods") to the extent that the same shall not have
been done before the Completion Date. Purchaser shall
ensure that the Company shall afford at all reasonable
times such access to its books, accounts and records as
is reasonably necessary to enable Seller or its duly
authorised agents to prepare such computations and
returns and conduct matters relating thereto in
accordance with this paragraph (a), provided that
Seller or its duly authorised agents shall on
submission of the same supply a copy thereof to the
Company or its duly authorised agents and shall on
posting or receipt of any correspondence with a
Taxation Authority which relates to such periods supply
one copy of each item of correspondence to the Company
or its duly authorised agents.
(b) Purchaser shall ensure that the Company shall cause the
returns mentioned in paragraph (a) above to be
authorised and signed without amendment or with such
amendments as Seller shall agree, and shall give Seller
or its agents all such reasonable assistance as may be
required to agree those returns with the appropriate
Taxation Authorities, provided that the Company shall
<PAGE>
<PAGE> 42
not be obliged to take any such action as is mentioned
in paragraph (a) above or this paragraph (b) in
relation to any return that is not full, true and
accurate in all material respects.
(c) Subject to paragraph (d) below, Purchaser or its duly
authorised agents shall prepare all documentation and
deal with all matters (including correspondence)
relating to the Taxation affairs of the Company for all
periods ending after the Economic Date.
(d) In relation to the liability of the Company to
corporation tax for the accounting period next ending
after the Economic Date, to the extent that it could
affect the liability of Seller to make any payment or
ability to receive any payment (whether by way of set
off or otherwise) under this Agreement or the Deed of
Tax Indemnity Purchaser shall ensure that:
(i) in respect of any corporation tax return for
such period, no return is submitted to a
Taxation Authority unless such return has first
been given to Seller for approval no later than
30 days before the due date for submission and
will not be submitted before such due date
without Seller's written agreement; and
(ii) in respect of any such corporation tax returns
and in respect of any communication with any
Taxation Authority relating thereto, in either
case to the extent that the same relates to or
could affect the treatment for Taxation purposes
of any Event (as defined in the Deed of Tax
Indemnity) occurring or deemed for Taxation
purposes to occur on or before the Economic
Date;
(A) the Company takes account of any
comments (where such comments relate to
matters that could affect the liability
of Seller to make any payment or the
ability to receive any payment (whether
by way of set off or otherwise) under
this Agreement or under the Deed of Tax
Indemnity) made by Seller or its agents
in relation to such return where such
comments are received no later than 15
days before the due date for submission;
<PAGE>
<PAGE> 43
(B) such return is subsequently submitted to
the Inland Revenue without amendment or
only with such amendments as Seller
shall agree;
(C) a copy of any such communication
received from any Taxation Authority is
provided to Seller within seven days of
the receipt of such communication;
(D) a copy of any such communication
(together with a copy of any supporting
material) proposed to be sent to any
Taxation Authority is provided to Seller
not less than 14 days before the same is
intended to be submitted, together with
notification of the date on which it is
intended to be so submitted;
(E) a copy of any such communication sent to
any Taxation Authority is provided to
Seller within seven days of the despatch
of such communication;
(F) the Company considers any comments made
by or on behalf of Seller in relation to
any such communication proposed to be
sent to the Taxation Authority before
submission to such Taxation Authority
and takes the same into account to the
extent reasonable,
PROVIDED THAT the Company shall not be obliged to take
any such action as is mentioned in this paragraph (d)
in relation to any return or communication that is not
full, true and accurate in all material respects.
(e) Purchaser shall ensure that the Company shall afford
such access to the books, accounts and records of the
Company as is reasonable to enable Seller or its duly
authorised agents to review such returns or
communications (and to take and retain copies thereof)
and to conduct matters relating thereto in accordance
with paragraph (d) above.
<PAGE>
<PAGE> 44
(f) Purchaser shall ensure that the Company and the
Subsidiaries will act in accordance with Seller's
requests to make and join in such claims, surrenders
and elections (including provisional or final claims
and/or surrenders of losses, group relief and advance
corporation tax) in respect of the accounting periods
of the Company and/or any Subsidiary for CT purposes
and in respect of chargeable periods for PRT purposes
ending on or before the Economic Date as Seller may
direct in writing, and that they will not take any
action resulting in any such claims, surrenders or
elections already made being varied, revoked or
withdrawn.
6.2 Clause 6.1 shall apply in relation to the Subsidiaries in
the same way as it applies in relation to the Company.
Indemnities
-----------
6.3 Excluded Lease and Relevant Disputes and Agreements
---------------------------------------------------
(a) Whenever the same are accrued, incurred, received or
enjoyed (as the case may be):
(i) Seller shall be liable for, and shall indemnify
and keep indemnified Purchaser (for itself and
as trustee for the Company and the Subsidiaries)
against, all costs, charges, expenses, claims,
liabilities and obligations (together
"Obligations") suffered or incurred (including,
for the avoidance of doubt, costs reasonably and
properly incurred in order to obtain the
Benefits (as defined below)) by any or all of
Purchaser, the Company and the Subsidiaries in
respect of the Excluded Lease or the transfer
thereof to a member of the Seller Group and the
Relevant Disputes and Agreements; and
(ii) provided it has fully complied with its
obligations under 6.3(a)(i) above Seller shall
be entitled to all income, credits, allowances,
receipts and rebates (together "Benefits")
received or enjoyed by any or all of the Seller
Group, Purchaser, the Company and the
Subsidiaries in respect of the Excluded Lease
<PAGE>
<PAGE> 45
and the Relevant Disputes and Agreements (and
Purchaser shall be liable to account to Seller
in respect of such Benefits (unless received by
the Seller Group)).
(b) The above indemnity and obligation to account shall
apply to Obligations and Benefits whether arising
before or after Completion, but shall not apply to the
extent that the same have already been taken into
account in determining the Net Working Capital.
6.4 British Sun Oil Company Limited
-------------------------------
(a) Seller shall be liable for, and shall indemnify and
keep indemnified Purchaser (for itself and as trustee
for the Company and the Subsidiaries) against, all
Obligations suffered or incurred by any or all of the
Purchaser, the Company and the Subsidiaries after
Completion in respect of the business and activities of
BSOC prior to the Completion Date.
(b) This indemnity shall not apply to the extent that such
Obligations have already been taken into account in
determining the Net Working Capital. Nor shall it
apply to any Obligation to the extent that such
Obligation arises, or is greater than it would
otherwise be, by reason of or in connection with any
trade, business or other activity carried on by BSOC
after the Completion Date not being a trade, business
or other activity as so carried on at the Completion
Date.
6.5 Other Indemnities
-----------------
(a) Seller shall be liable and shall indemnify and keep
indemnified Purchaser (for itself and as trustee for
the Company and the Subsidiary) in respect of all
Obligations arising out of or in connection with the
following:
(i) all Obligations suffered or incurred by any or
all of the Purchaser, the Company and the
Subsidiaries after Completion in respect of the
transfer of Sun Oil Company (UK) Limited from
Sun Oil Britain Limited to Sun Company, Inc on
1st July 1996 and any transactions relating to
or arising out of such transfer; and
<PAGE>
<PAGE> 46
(ii) the indemnity given by the Company to British
Petroleum as provided in a commissioning and
pigging agreement dated 14th November 1986
between such parties in respect of the damage to
the Forties Systems caused by Commissioning &
Pigging (all as defined in such agreement) if
the liabilities relate to or arise out of any
omission, act, activity, or business conducted
by the Company on or before Completion ("a
Relevant Activity"); and
(iii) the indemnity from the Company to Total and Elf
pursuant to a trust deed dated 6 July 1992
between Lasmo North Sea PLC, Ranger, Total and
Elf and a supplemental novation deed relating
thereto between the Company and such parties if
the Liabilities relate to or arise out of a
Relevant Activity; and
(iv) any liability of the Company arising out of the
failure or inability of the Company to fulfil
its obligations to deliver gas to British Gas
Corporation as provided in an agreement dated 30
April 1985 between the Company, British Sun Oil
Company Limited and British Gas Corporation
("the BG Contract") such failure or inability
being due to or arising out of a shortfall in
production at the Thames Field whether before or
after Completion. Seller shall be under no
liability hereunder unless the liability of the
Company arising out of such failure or inability
(as determined under the BG Contract) shall
exceed $5.86 million (or its equivalent in
Pounds applying an exchange rate of one
pound:$1.55) in which event Seller's liability
shall be limited to an amount equal to the
difference between $4.93 per MCF and the Market
Price (as hereinafter defined) for each MCF
which the Company fails or is unable to so
deliver. In this paragraph (iii) "Market Price"
means the average price (expressed in Dollars)
per MCF for sales of gas at the Bacton Terminal
during the three calendar months prior to any
claim made against Seller hereunder; and
(v) one half of the Company's proportionate share
(in respect of the period from 1st January 1996
to the Economic Date) under the Balmoral UOA of
<PAGE>
<PAGE> 47
any amount of overspend arising under clause
9.3.4 of the Brown & Root Agreement for the
calendar year 1996 PROVIDED THAT Seller's
liability hereunder shall not exceed its
proportionate share under the Balmoral UOA of
any overspend in excess of 10%; and
(vi) one half of the Company's proportionate share
(in respect of the period from 1st January 1996
to the Economic Date) under the Balmoral UOA of
any amount paid in respect of the gainshare
arrangements set out in the Brown & Root
Agreement for the calendar year 1996; and
(vii) any Obligations suffered or incurred by any or
all of the Purchaser, the Company and the
Subsidiaries arising out of the termination by
the Company (at the instance of Seller)
following execution hereof of the consultancy
agreements referred to in paragraph 7.3 of the
Schedule to the Disclosure Letter such
termination to take effect at Completion; and
(viii) any Obligations suffered or incurred by the
Company or any Subsidiary after the date hereof
in relation to any proceedings or claims against
or disputes with the Company (or such
Subsidiary) which, at the date hereof, have been
commenced or threatened in writing against the
Company other than those proceedings or claims
or disputes disclosed in paragraphs 11.1(A), 1,
2 and 3 and 11.1(B) of the Disclosure Letter;
and
(ix) any obligation of the Company arising under the
guarantee given for the obligations of BSOC
under a credit agreement dated 14th August, 1985
between, inter alia, BSOC and International
Westminster Bank plc.
6.6 Subject to clauses 6.3(b) and 6.4(b),
(a) if any Obligations in respect of the indemnities
provided in clauses 6.3, 6.4 and 6.5 are incurred by
Purchaser or the Group, Purchaser shall notify Seller
accordingly and Seller shall pay to Purchaser (for
itself and as trustee for the Company and the
Subsidiaries) (subject to paragraph (c) below) amounts
<PAGE>
<PAGE> 48
equal to the liability (including all costs and
expenses reasonably and properly incurred) of
Purchaser, the Company or the Subsidiaries in respect
of such Obligations. Furthermore, Purchaser shall keep
Seller fully informed of all material developments in
respect of any matter which relates to or is likely to
relate to any of the indemnities provided in clauses
6.3, 6.4 and 6.5 (including, without limitation, the
terms of any proposed settlement of the latter);
(b) if any Benefits in respect of the Excluded Lease or the
Relevant Disputes and Agreements are received by,
credited to or enjoyed by Purchaser or the Group,
Purchaser shall notify Seller accordingly and Purchaser
shall pay to Seller (subject to paragraph (c) below)
amounts equal to and in respect of such Benefits (after
deducting all costs and expenses reasonably and
properly incurred in obtaining the Benefits); and
(c) the provisions of clause 3.3(b) and 3.3(c) shall apply
mutatis mutandis in relation to all Obligations and
Benefits referred to in this clause 6.6 as they apply
in relation to amounts referred to in clause 3.3(a).
6.7 (a) Any amount to be paid in accordance with clauses 6.3,
6.4 or 6.5 shall be paid within fourteen days of
receipt thereof (in the case of Benefits) (or, in the
case of Obligations, within fourteen days of receipt of
notification from the relevant indemnified Party that
it (or (if relevant) any member of the Group) has
incurred such Obligations) to a bank account nominated
by the relevant indemnified Party.
(b) Interest shall accrue on amounts due and payable under
this clause 6.7 which remain unpaid at the expiry of
the fourteen day payment period at the rate of 3 per
cent per annum over the Agreed Rate from the day
following the expiry of such fourteen day period until
the date of payment.
(c) Without prejudice to paragraphs (a) and (b) above, if
any dispute arises over whether any amount is payable
pursuant to clause 6.3, 6.4 or 6.5 and such dispute has
not been resolved within sixty days of the date of the
first written notice that such a dispute exists, then
either party may at any time thereafter refer the
matter for determination by a firm of independent
chartered accountants, and the principles set out in
<PAGE>
<PAGE> 49
clause 3.7 shall apply, mutatis mutandis, in respect of
their appointment and their determination of the
matter.
(d) If any amount paid or due to Purchaser under this
clause 6 is a taxable receipt of Purchaser then the
amount so paid or due (the "Net Amount") shall be
increased to an amount which, after subtraction of the
amount of any Taxation on such increased amount which
arises, shall equal the Net Amount provided that if any
payment is initially made on the basis that the amount
due is not taxable in the hands of Purchaser and it is
subsequently determined that it is, or vice versa, such
adjustment shall be made between Purchaser and Seller
as may be required.
(e) Where any amount payable by Seller or by Purchaser (as
the case may be) pursuant to clauses 6.3, 6.4 or 6.5
relates to an item which can or should be taken into
account as a deduction or receipt in computing any
liability to Taxation of the Company or any one of the
Subsidiaries (but, in relation to corporation tax on
chargeable gains, only in relation to the disposals the
subject of clauses 6.3, 6.4 or 6.5 and only to the
extent that the computation produces a chargeable gain
or allowable loss), the same shall be reduced by the
percentage equal to the applicable percentage rate of
Taxation (not being, in the case of Corporation Tax,
the small companies' rate) for the relevant accounting
period in which the amount in question becomes payable
or receivable (irrespective of whether that is a period
for which tax payable by the Company or Subsidiary is
in fact reduced or increased by reference to the item
or the amount payable or receivable, and irrespective
of the availability of any other reliefs or
allowances). In relation to whether the provisions of
this clause 6.7(e) apply:
(i) the Purchaser agrees to procure that, unless
Seller otherwise agrees in writing, the Group
shall prepare and submit any computations and
returns required for the purposes of the Group's
Taxation affairs as if they did so apply; and
(ii) in the event that any Taxation Authority queries
whether they do so apply, the provisions of
clause 5 of the Deed of Tax Indemnity shall
apply as if such query were a Claim (as defined
in the Deed of Tax Indemnity).
<PAGE>
<PAGE> 50
(f) If pursuant to clause 6.7(e) it has initially been
assumed that an amount can or then should so be taken
into account as a deduction or receipt and subsequently
it is finally determined not to be a deduction or
receipt in computing any liability to Taxation of the
Company or any one of the Subsidiaries, Seller shall
promptly pay to Purchaser an amount equal to the amount
by which the relevant item had been previously reduced.
If pursuant to clause 6.7(e) it has initially been
assumed that an amount cannot or should not be taken
into account as a deduction or receipt and subsequently
it is finally determined to be a deduction or receipt
in computing any liability to Taxation of the Company
or a Subsidiary, Purchaser shall promptly pay to Seller
an amount equal to the amount by which the relevant
item would have been so reduced, if it had been
initially assumed to be a deduction or receipt.
6.8 Employees
---------
(a) Purchaser and the Group shall subject to paragraph (c)
be responsible for all Obligations in respect of such
of the Employees as shall be nominated by Purchaser to
Seller not less than five Business Days prior to
Completion in respect of all periods following
Completion and in respect of all accrued rights of such
Employees as at Completion and Purchaser shall
indemnify Seller (and any member of the Seller Group)
in respect thereof;
(b) Seller shall prior to Completion terminate or procure
termination of the contracts of employment of such of
the Employees as shall be nominated by Purchaser to
Seller not less than five Business Days prior to
Completion and shall be responsible for and shall hold
harmless and indemnify and keep indemnified Purchaser
and the Group in respect of all Obligations arising in
relation to such Employees whether or not arising out
of or in connection with the contracts of employment of
such Employees or the termination thereof;
(c) Seller shall procure that Company shall pay to the
Employees as they fall due before Completion such sum
or sums as the Company shall be obliged under the
contracts of employment of such Employees to pay to
such Employees by way of retention bonus and Seller
<PAGE>
<PAGE> 51
shall procure that, as at Completion, the Company shall
be under no contractual obligation whether actual or
contingent to pay any retention bonus to any Employee
and Seller shall be responsible for and shall hold
harmless and indemnify and keep indemnified Purchaser
and the Group in respect of the contractual obligations
to pay such bonus and all and any Obligations arising
directly or indirectly out of or in connection with the
contractual obligation to pay any such bonus. Seller
represents that the names of each of the Employees
entitled to such bonus and the amounts payable to each
of them are specified in Schedule 6;
(d) Seller shall terminate, or shall procure the
termination of, on or before Completion the Company's
and any Employee's participation in the Group Long Term
Disability Insurance Scheme and/or and/or the Share
Purchase Plan and/or the Private Medical Insurance
Scheme and any other scheme, plan or other arrangement
(excluding the Pension Scheme) for the provision of any
non-cash benefit to any Employee and Seller shall be
responsible for and shall hold harmless and indemnify
and keep indemnified Purchaser and any member of the
Group in respect of all and any Obligations arising
directly or indirectly out of or in connection with
such scheme or schemes and/or plan and/or arrangement,
or their termination, or cessation of participation by
the Company or any Employee therein, including for the
avoidance of doubt all and any obligations arising
directly or indirectly in relation to any Employees who
may from time to time have been, or be entitled, to
receive any benefit under such scheme or schemes and/or
plan and/or arrangement.
(e) Seller shall be liable for and shall indemnify and keep
indemnified Purchaser and the Group in respect of all
Obligations arising out of any liability incurred by
the Company under the indemnity contained in paragraph
9 of Appendix 5 of the Brown & Root Agreement;
(f) Where any amount payable by Seller pursuant to this
clause 6.8 relates to an item which can or should be
taken into account as a deduction or receipt in
computing any liability to Taxation of the Company or a
Subsidiary (but, in relation to corporation tax on
chargeable gains, only to the extent that the
computation produces a chargeable gain or allowable
loss), the same shall be reduced by the percentage
<PAGE>
<PAGE> 52
equal to the applicable percentage rate of Taxation
(not being, in the case of Corporation Tax, the small
companies' rate) for the relevant accounting period in
which the amount in question becomes payable or
receivable (irrespective of whether that is a period
for which tax payable by the Company or Subsidiary is
in fact reduced or increased by reference to the item
or the amount payable or receivable, and irrespective
of the availability of any other reliefs or
allowances). If pursuant to this clause 6.8(f) it has
initially been assumed that an amount can or then
should so be taken into account as a deduction or
receipt and subsequently it is finally determined not
to be a deduction or receipt in computing any liability
to Taxation of the Company or any one of the
Subsidiaries, Seller shall promptly pay to Purchaser an
amount equal to the amount by which the relevant item
had been previously reduced.
If pursuant to this clause 6.8(f) it has initially been
assumed that an amount cannot or should not be taken
into account as a deduction or receipt and subsequently
it is finally determined to be a deduction or receipt
in computing any liability to Taxation of the Company
or a Subsidiary, Purchaser shall promptly pay to Seller
an amount equal to the amount by which the relevant
item would have been so reduced, if it had been
initially assumed to be a deduction or receipt.
(g) Purchaser will procure that the Company will provide
all reasonable assistance and take any requisite action
to enable Seller to comply with its obligations under
sub-clauses (b), (c), (d) and (e) above and will
procure that the Company will permit Seller to have
reasonable control over dealing with any claims in
respect of which Purchaser and the Group has the
benefit of Seller's indemnity in sub-clauses (b), (c),
(d) and (e) above.
(h) (i) Seller undertakes to Purchaser for its own
benefit and as trustee and agent for the Company
to indemnify and to keep indemnified and to hold
harmless on a continuing basis the Purchaser and
the Company against all and any liabilities,
actions, claims and reasonable costs (including
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<PAGE> 53
reasonable legal expenses) which may be brought
or made against or incurred by the Company
and/or the Purchaser of any nature arising out
of or in connection with:
(A) the Pension Scheme (including, but
without limitation to the generality of
the foregoing, the costs of the winding
up of the Pension Scheme) other than any
such liability, action, claim and cost
which arises as a result of any wilful
default after Completion of the Company;
(B) Appendix 5 (Pension Transfer Payment
Provisions) to the Brown & Root
Agreement.
(ii) to the extent that the Company has any rights,
powers and discretions under the Pension Scheme,
Purchaser shall following Completion procure
that, subject to Seller complying with the above
paragraph, the Company exercises or refrains
from exercising any and all its rights, powers
and discretions under the Pension Scheme as
Seller may from time to time reasonably request.
(iii) subject to (ii) above Seller shall:
(aa) procure that prior to Completion the
Trustees shall be changed so as to be
Michael Allen and/or such other Trustees
as the Seller may nominate (other than
the Purchaser or the Company);
(bb) procure that prior to Completion the
provisions of the Pension Scheme shall
be amended (subject to the agreement of
the Trustees) so that:
(A) all rights, powers and discretions
of the Company under the Pension
Scheme shall be exercisable by the
Trustees instead of the Company
provided that no such exercise of
rights, powers and discretions can
or may impose any additional
obligations (whether actual or
contingent) on the Company;
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<PAGE> 54
(B) all costs, charges and expenses
incurred in relation to the Pension
Scheme shall be met out of the
assets of the Pension Scheme; and
(C) no new participating employers or
members shall be admitted to the
Pension Scheme;
(cc) shall use its reasonable endeavours to
procure that the Trustees shall wind up
the Pension Scheme as soon as reasonably
practicable and with effect from
Completion in accordance with its
provisions and on the basis that all its
assets shall be used for the benefit of
its members to the extent not required
to meet the Trustees' expenses and
remuneration.
6.9 Section 338 Election
--------------------
(a) Seller and Purchaser agree that Purchaser shall make a
timely and effective election under section 338(g), and
Purchaser and Seller will jointly make a timely and
effective election under section 338(h)(10) of the Code
(the "Election"), such Election to be executed with
respect to the Company pursuant to the procedures
specified in US Treas. Reg. Sec. 1.338(h)(10)-1. No
later than 7 days prior to Completion, Seller shall
deliver to Purchaser a duly executed Internal Revenue
Service Form 8023-A (the "Form") in the usual form
which names the Company as the Target pursuant to
Treas. Reg. Sec. 1.338-1(c)(13). Purchaser shall have
4 days to review and comment on the form prepared by
Seller. Seller and Purchaser shall complete and
execute the Form no later than the Completion Date.
Following the Completion Date, Purchaser and Seller
shall timely and properly file the Form, together with
all required attachments, with the appropriate IRS
office or offices and each shall furnish the other
Party with a true and correct copy of the Form as and
when filed. Seller shall pay any and all Federal
income taxes resulting from the Election.
(b) Seller and Purchaser agree that the Consideration and
liabilities of Purchaser (plus other relevant items)
will be allocated to the assets of the Group for all
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<PAGE> 55
United States federal, state, county or local
government tax purposes as shown in the Allocation
Schedule attached hereto as Schedule 11. Seller,
Purchaser and the Group will file all federal or any
state, county or local government Tax Returns as
defined in paragraph 1 of Schedule 12 (including
amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
6.10 United States Federal, State and Local Taxes
--------------------------------------------
The provisions of Schedule 12 shall have effect in relation
to any Tax as defined in paragraph 1(a) of Schedule 12.
6.11 Audit and other adjustments
---------------------------
(a) Without prejudice to the provisions of clause 6.3, any
Benefits or Obligations (including the cost of any
audit) accruing in respect of the Licence Interests in
the form of amounts receivable or payable by the
Company or SONSL resulting from an audit pursuant to a
JOA or UOA or from any other subsequent adjustment in
relation to the operation of and expenditure
attributable to the Licence Interests in the period
prior to the Economic Date shall accrue to Seller and
in the period after the Economic Date shall accrue to
Purchaser, and accordingly Seller shall indemnify
Purchaser against any such Obligations, and Purchaser
shall account to Seller in respect of such Benefits,
and in determining the amount so due by Seller or
Purchaser the provisions of clause 3.3(b) shall apply
in relation to the Obligation or Benefit as it applies
in relation to an amount referred to in clause
3.3(a)(i).
(b) Where any such audit takes place after the Completion
Date, Purchaser shall use all reasonable endeavours to
enable Seller to make representations directly to any
relevant Operator and shall in any event be obliged to
take account of Seller's representations in connection
with such audit and shall notify Seller of any audit
adjustment as soon as practicable after the results of
such audit are known.
(c) If as a result of any audit adjustment or otherwise,
either Seller or Purchaser is liable to pay any amount
to the other, then, to the extent that the amount
<PAGE>
<PAGE> 56
referred to in clause 3.1 has not already been adjusted
pursuant to the provisions of clause 3 in respect
thereof, or the amount has not otherwise been paid in
accordance with clause 6.3, such amount shall be paid
to the relevant Seller's Account or the relevant
Purchaser's Account (as appropriate) within thirty
Business Days after the amount receivable or payable as
a result of such an audit or other subsequent
adjustment has been taken into account by the relevant
Operator in the Operator's billing statement.
6.12 Any payment made under any indemnity contained in this
clause 6 shall be treated by Purchaser as far as possible as
a reduction or increase in the Consideration.
6.13 If at any time any applicable law, regulation or regulatory
requirement requires Purchaser to make any deduction or
withholding from any payment made in respect of any amount
due from Purchaser hereunder, the amount so due shall be
increased to the extent necessary to ensure that, after the
making of such deduction or withholding, Seller receives, on
the due date for such payment, a net sum equal to the sum
which it would have received had no such deduction or
withholding been required to be made.
6.14 If Purchaser is required by law to make any deduction or
withholding as referred to in clause 6.13 above, Purchaser
shall:
(a) make such deduction or withholding;
(b) pay the full amount deducted or withheld to the
relevant authority in accordance with applicable law;
and
(c) forthwith furnish to Seller the original, or a
certified copy, of a receipt evidencing payment
thereof.
6.15 If, following any such deduction or withholding from any
payment by Purchaser as is referred to in clause 6.13,
Seller shall receive or be granted a credit against or
remission for any Taxation payable by it, Seller shall,
subject to Purchaser having made any increased payment in
accordance with clause 6.13 and to the extent that Seller
can do so without prejudicing the retention of the amount of
such credit and without prejudice to the right of Purchaser
to obtain any other Relief (as that term is defined in the
<PAGE>
<PAGE> 57
Deed of Tax Indemnity) which may be available to it,
reimburse Purchaser with such amount as Seller shall
(acting in good faith) certify to be such portion of
such credit as will leave Seller (after such
reimbursement) in no worse a position than it would
have been had there been no such deduction or
withholding from the payment by Purchaser as aforesaid.
Such reimbursement shall be made forthwith upon Seller
certifying that the amount of such credit has been
received by it.
6.16 Proposed Reorganisation
-----------------------
In relation to any Proposed Reorganisation:
(a) to the extent that Seller's liability under this
Agreement or under the Deed of Tax Indemnity to make
to, (or the ability to receive any payment from),
(whether by way of set off or otherwise), Purchaser,
the Company or the Subsidiaries arises, or is increased
or is decreased as a result of any proposals or
arrangements or acts (whether implemented or not) in
relation to any Proposed Reorganisation, such
liability, ability, increase or decrease shall be
ignored;
(b) Purchaser shall not and shall procure that the Company
or the Subsidiaries shall not file any notice, claim,
surrender, election with any Taxation Authority or
revoke, withdraw, amend or otherwise alter such notice,
claim, surrender or election without Seller's consent
in writing if such notice, claim, surrender or election
(or such revocation, withdrawal, amendment or
alteration) could affect the liability to Taxation of
Seller, the Company or any of the Subsidiaries prior to
Completion.
6.17 Advance Corporation Tax
-----------------------
In relation to any advance corporation tax in respect of any
distribution made prior to the Completion Date which has not
been estimated in the Accounts as recoverable against any
liability of the Group to corporation tax for periods up to
<PAGE>
<PAGE> 58
and including the Economic Date ("Surplus ACT"), Purchaser
agrees:
(a) to the extent that such Surplus ACT is later found to
be capable of being set-off against any liability of
the Group to corporation tax for such periods that it
will procure that such claims are made as are required
in order for such set-off to be effective and that if
any such action gives rise to a repayment of
corporation tax, it will account to Seller for an
amount equal to such repayment (together with any
associated interest or repayment supplement);
(b) to the extent that (a) does not apply that it will
account to Seller for an amount equal to any such
Surplus ACT which is capable of set-off against any
liability of a member of the Group to corporation tax
for accounting periods commencing on or after the
Economic Date on the earlier of the date on which the
benefit of such set-off is recognised in the tax
computations prepared by such member and the date on
which such set-off gives rise to a reduction in the
liability to pay any amount in respect of corporation
tax for such accounting period;
(c) if payment has been made by Purchaser under either (a)
or (b) above and subsequently it is finally determined
that the relevant Surplus ACT is incapable of set off
by reason of an act or omission of Seller or Seller
Group or the Group on or before Completion, Seller
shall promptly repay to Purchaser, together with
interest at the Agreed Rate, an amount equal to the
amount of such Surplus ACT which is so incapable of set
off;
(d) if an Event (as defined in the Deed of Tax Indemnity)
occurs or is deemed for Taxation purposes to occur on
or after Completion in relation to any member of the
Group, which renders such Surplus ACT incapable of set
off which would otherwise have been so capable,
Purchaser shall be under no obligation to Seller under
(a) or (b) but any liability of Seller under the Deed
of Tax Indemnity shall be reduced by an amount equal to
the payment that would otherwise have been made; and
(e) in calculating any liability of Seller or Purchaser to
make any payment under this clause 6.17, the provisions
of clause 6.16 shall be ignored.
<PAGE>
<PAGE> 59
7 Representations and Warranties
------------------------------
7.1 Subject to the provisions of this clause 7 and save as fully
and fairly disclosed under the terms of the Disclosure
Letter, Seller hereby represents, warrants and undertakes to
Purchaser that each of the warranties set out in Part II of
Schedule 3 is true and accurate in all respects and not
misleading at the date of this Agreement. For the purposes
of this clause 7 and the Disclosure Letter "fully and fairly
disclosed" means disclosed in such manner and such detail as
to enable Purchaser to make an informed and materially
accurate assessment of the matter concerned.
7.2 Subject to the provisions of this clause 7 and save as
otherwise expressly disclosed in writing to Seller,
Purchaser hereby represents, warrants and undertakes to
Seller that each of the warranties set out in Part I of
Schedule 3 is true and accurate in all respects and not
misleading at the date of this Agreement.
7.3 Neither Party shall do any act or thing, or authorise any
act or thing to be done over which it has control or which
it can otherwise by the exercise of any right or power
reasonably prevent from being done, which would prevent any
representation, warranty or undertaking given by it above
from being true and accurate in all material respects if the
same were to be repeated at the Completion Date by reference
to circumstances then existing.
7.4 Seller shall promptly notify Purchaser in writing of any
circumstances or facts, omission or matters which (whenever
arising) become known to it or any member of the Group prior
to Completion which are or are reasonably likely to be
inconsistent in any material respect with any of the
representations and warranties referred to in clause 7.1 (or
which would be so inconsistent were such representations and
warranties to be repeated each day from the date hereof to
the Completion Date). Such notice shall state that it is
served pursuant to this clause 7.4. This clause 7.4 shall
apply mutatis mutandis in the event of any circumstances or
facts or matters which (whenever arising) become known to
Purchaser prior to Completion which are inconsistent in any
material respect with the representations and warranties
referred to in clause 7.2 (or which would be so inconsistent
were such representations and warranties to be repeated each
day from the date hereof to the Completion Date).
<PAGE>
<PAGE> 60
7.5 Each of the representations and warranties contained in this
Agreement shall be construed as a separate and independent
warranty and (except where expressly provided to the
contrary) shall not be limited or restricted by reference to
or inference from the terms of any other representation or
warranty contained herein or any other term of this
Agreement.
7.6 In the event that any circumstance, fact or matter is
notified by Seller in accordance with clause 7.4 above which
would, if the same were to subsist or be repeated at
Completion, be inconsistent with Seller's representations
and warranties as aforesaid (an "Inconsistency") or
Purchaser becomes aware of an Inconsistency and so notifies
Seller, then:
(a) if the Inconsistency is capable of remedy, Seller shall
use its best endeavours to remedy the same at its own
expense as soon as practicable;
(b) if the Inconsistency has not been so remedied at the
time set for Completion to the reasonable satisfaction
of Purchaser or if the same is incapable of remedy, the
Parties shall discuss the effects on the value of the
business and assets of the Group and whether the terms
hereof could be amended to take account of any such
change in circumstance, fact or matter;
(c) in the absence of agreement between the Parties as to
such amendment, and PROVIDED THAT the adverse effect of
all Inconsistencies which have not been remedied or are
incapable of being remedied on the value of the
business and assets of the Group exceeds $29,100,000
Purchaser shall not be obliged to complete the
acquisition of the Sale Shares and shall be entitled by
notice in writing to Seller given at any time prior to
Completion to terminate this Agreement. In the
circumstances contemplated by paragraphs (a) to (c),
termination shall, save as provided in paragraph (e),
be Purchaser's only remedy and, if this Agreement is so
terminated, Seller shall have no further liability to
Purchaser with respect to or in connection with such
Inconsistencies; and
(d) subject to paragraph (c) and PROVIDED THAT the adverse
effect of all such Inconsistencies on the value of the
business and assets of the Group exceeds $2,900,000,
Purchaser shall be obliged to complete the acquisition
<PAGE>
<PAGE> 61
of the Sale Shares but without prejudice to its right
to claim damages in respect of such Inconsistencies, in
which event the provisions of clauses 7.13 to 7.22
shall apply mutatis mutandis; and
(e) where Purchaser terminates this Agreement under this
clause 7.6 the provisions of clause 10.3 shall apply.
This clause 7.6 shall apply mutatis mutandis in the event of
any circumstance, fact or matter notified by Purchaser in
accordance with clause 7.4.
7.7 Not used.
7.8 Save as and only to the extent set forth in clause 7.1, or
as the case may be clause 7.2 neither of the Parties makes
any representations or warranties in respect of any matter
or thing and disclaims all liability and responsibility for
any representation, warranty, statement, opinion or
information made or communicated (orally or in writing) to
the other (including, without limiting the generality of the
foregoing, any representation, warranty, statement, opinion,
information or advice made and communicated to Purchaser by
any officer, stockholder, director, employee, agent,
consultant or representative of Seller or its agents or any
of their respective Affiliates) and Purchaser acknowledges
and affirms that it has not relied upon any such
representation, warranty, statement, opinion or information
in entering into or carrying out the transactions
contemplated by this Agreement or any of them. Without
limiting the generality of the foregoing, Seller makes no
representations or warranties as to (a) the amounts of
Petroleum reserves attributable to the Licence Interests, or
(b) any geological, geophysical, engineering, economic or
other interpretations, forecasts or evaluations.
7.9 Seller shall not be liable for any claim in relation to
breach of the representations and warranties given by Seller
unless it shall have received from Purchaser written notice
thereof given on or before the expiry of 30 months following
the Completion Date, Provided that in respect of claims made
under Warranties relating to Taxation, or any claim under
the Deed of Tax Indemnity, the last date for written notice
of such claiming shall be the seventh anniversary of the
Completion Date. Any claim made shall be deemed to have
been withdrawn unless proceedings in respect thereof have
been both issued and served on Seller within 12 months of
the giving of such notice. Purchaser undertakes to give the
<PAGE>
<PAGE> 62
Seller written notice as soon as practicable after it
becomes aware of a breach of warranties and representations
by Seller together with reasonable details of the relevant
claim including its provisional estimate (on a non-binding
and without prejudice basis) of the amount of such claim.
7.10 Seller acknowledges that Purchaser has entered into this
Agreement in reliance on the representations undertakings
and warranties of Seller referred to herein.
7.11 Purchaser shall not be liable for any claim in relation to
breach of the representations and warranties unless it shall
have received from Seller, as soon as practicable after
Seller becomes aware of the same, written notice containing
reasonable details of the relevant claim including Seller's
provisional estimate of the amount of the claim and in any
event such notice is received on or before the expiry of 30
months following the Completion Date.
7.12 The liability of Seller under or in respect of the
Warranties given by it, the Deed of Tax Indemnity, Schedule
12 and the indemnities set out in clause 6 shall be limited
as follows:
(a) there shall be disregarded for all purposes any claim
for a breach of Warranty in respect of which the amount
of the damages or indemnity payment to which Purchaser
would otherwise be entitled is less than $200,000 (two
hundred thousand Dollars);
(b) Seller shall have no liability for breaches of Warranty
except to the extent that the damages to which
Purchaser is entitled in aggregate exceed $2,000,000
(two million Dollars) and to the extent that they do
exceed that sum, the full amount shall be recoverable
and not merely the excess;
(c) The liability of Seller under or in respect of the Deed
of Tax Indemnity and Schedule 12 shall not be subject
to clause 7.12(a) and (b) Provided that Seller shall
not be liable to make the first payment under the Deed
of Tax Indemnity or Schedule 12 until the aggregate
amount of such payments is $250,000 or more Provided
Further that once such aggregate amount is reached, the
whole amount shall become payable and thereafter Seller
shall make payments in respect of claims under the Deed
of Tax Indemnity or Schedule 12 as they fall due from
time to time and if at the end of the period of seven
years referred to in clause 7.9 the aggregate liability
<PAGE>
<PAGE> 63
of Seller under or in respect of the Deed of Tax
Indemnity and Schedule 12 shall be less than $250,000
the whole of such aggregate amount shall nevertheless
be payable.
(d) for the purpose of sub-clause 7.12(a) where a number of
claims arise directly from the same event,
circumstance, fact or matter, such claims shall be
treated as a single claim in respect of such event,
circumstance, fact or matter; and
(e) the maximum aggregate liability of Seller in respect of
all claims for breach of Warranty or under the Tax
Indemnity or Schedule 12 or under paragraphs (ii) to
(viii) of clause 6.5 shall not exceed an amount equal
to the Consideration. For the avoidance of doubt, save
as provided in this paragraph (e), none of the
limitations set out in this clause 7.12 shall apply to
any indemnity given by Seller under this Agreement.
7.13 If:
(a) Purchaser becomes aware of any breach of Warranty by
Seller which may result in Purchaser having a claim
against Seller under this clause 7 as a result of or in
connection with a liability or alleged liability to a
third party, or
(b) Purchaser or the Company or the Subsidiaries is or may
be entitled to recover from some other person, firm,
authority or body corporate any sum in respect of which
Purchaser may have a claim against Seller under the
Warranties,
Purchaser shall as soon as practicable notify Seller thereof
in writing and Seller shall be entitled (i) to take and/or
require Purchaser to take any action Seller might reasonably
request to resist such liability or enforce (or ensure the
enforcement of) such recovery (in each case, in the name of
Purchaser (or the Company or the Subsidiaries, as the case
may be) but at the cost and expense of Seller and subject to
an indemnity in respect of such cost and expense any other
liability which Purchaser, the Company or Subsidiaries may
incur as a result of and any liability or obligation which
Purchaser, the Company or the Subsidiaries would not have
incurred but for any action taken by Purchaser or at his
direction pursuant to this paragraph to be given to
Purchaser the Company or the Subsidiaries in a form
<PAGE>
<PAGE> 64
reasonably required by Purchaser), and (ii) at its own cost
and expense to have conduct of any appeal, dispute,
compromise or defence of the dispute and of any incidental
negotiations for the aforesaid purposes, and Purchaser will
(and will ensure that the Company or the Subsidiaries, as
the case may be, will) give Seller all co-operation, access
and assistance for the purposes of resisting such liability
or enforcing such recovery (as the case may be) as Seller
may reasonably require unless Purchaser reasonably considers
that any step proposed under this paragraph will cause
costs, loss or liability to it or the Company or the
Subsidiaries which the indemnity to be provided under this
paragraph will not cover in full.
7.14 If Seller pays to Purchaser an amount pursuant to a claim in
respect of the representations and warranties and Purchaser
is entitled to recover from some other person any sum to
which it would not have been or become entitled but for the
circumstances giving rise to such a claim, Purchaser shall
promptly take such reasonable action as Seller may require
to enforce such recovery but always at the cost and expense
of Seller and subject to an indemnity covering the same
matters as in clause 7.13 above and shall as soon as
practicable repay to Seller so much of the amount paid by it
as equals the amount recovered from the third party, less
all costs, charges and expenses reasonably incurred by
Purchaser in obtaining that payment and in recovering that
amount from the third party. This clause shall apply
mutatis mutandis in favour of Purchaser where Seller is
entitled to recover from some other person.
7.15 Seller shall not be liable for breach of any of the
representations and warranties, nor shall Purchaser have any
rights in respect of any inconsistency therewith arising
after the date hereof, to the extent only that such breach
or inconsistency is occasioned by Seller doing or omitting
to do any act or thing at the written request of or with the
prior written agreement of Purchaser in accordance with
clause 4 during the Interim Period.
7.16 No liability shall arise on the part of Seller to Purchaser
in respect of any breach of any of the Warranties if and to
the extent that:
(a) any breach or claim occurs as a result of any
legislation coming into force after the date hereof
which takes effect retrospectively or the amount
recoverable in respect thereof is increased as a result
<PAGE>
<PAGE> 65
of any Taxation legislation, withdrawal of or change in
administrative practice or Taxation Authority
concessions coming into force after the date hereof
which takes effect retrospectively, or judicial
decision on any point inconsistent with the basis on
which the Company or the Subsidiary in question has
previously prepared and filed computations and returns,
or occurs or is increased as a result of any increase
in the rate of Taxation coming into force after such
date or occurs as a result of or is otherwise
attributable to Purchaser, an Affiliate of Purchaser,
or the Company or the Subsidiaries disclaiming any part
of the benefit of capital or other allowances against
Taxation claimed on or before the date hereof or
proposed to be claimed (information in relation to such
proposed claims having been provided to Purchaser in
writing under the terms of the Disclosure Letter, and
the amounts the subject of the same to be notified in
writing to Purchaser), or omitting to make or revising
or withdrawing any such claim or any election or
surrender or doing (or omitting to do) any other thing
in circumstances where the same affects the treatment
of any relief against Taxation taken into account in
the preparation of the Net Working Capital Statement or
claimed on or before the date hereof or proposed to be
claimed (provided that information in relation to such
reliefs or proposed claims has been provided to the
Purchaser in writing on or prior to Completion, and the
amounts the subject of the same are notified in writing
to the Purchaser);
(b) any such breach or claim consists of a claim for
Taxation for which the Company or any of the
Subsidiaries is primarily liable arising as a result of
transactions in the ordinary course of business of the
Company or the Subsidiaries after the Economic Date
(save insofar as such Taxation relates to the Excluded
Lease);
(c) the breach or claim relates to a claim or liability for
Taxation which would not have arisen but for any
winding-up or cessation of any trade or business
carried on by the Company or the Subsidiaries or change
in their respective accounting policies or practices
after Completion other than, in the case of any such
accounting policies or practices which do not accord
with Generally Accepted UK Accounting Principles as
they are in force at the date hereof, to bring them
into line with such principles;
<PAGE>
<PAGE> 66
(d) the breach or claim relates to a claim or liability for
Taxation which is stamp duty or stamp duty reserve tax
imposed as a result of or in consequence of the
purchase of the Sale Shares;
(e) the amount for which Seller is liable under the
Warranties does not exceed an amount in respect of the
same matter for which Seller is liable under the Deed
of Tax Indemnity, and such liability has been fully
satisfied;
(f) the breach or claim would not have arisen but for any
act voluntarily effected after Completion by Purchaser,
the Company or the Subsidiaries otherwise than pursuant
to a legally binding commitment created on or before
Completion and otherwise than in the ordinary course of
business and which Purchaser, an Affiliate of Purchaser
having an interest in the shares of the Company or
Subsidiary, or the Company or Subsidiary knew (or would
have known if it had made all reasonable enquiries)
would give rise to the liability in question;
(g) a payment has been made in respect of such breach or
claim pursuant to clause 6; or
(h) a liability in respect of a breach or claim has
operated to reduce the Consideration, pursuant to
clause 3.
7.17 Nothing in this Agreement shall relieve Purchaser of any
common law duty to mitigate any loss or damage incurred by
it in respect of any breach of the Warranties or any other
term of the Agreement.
7.18 If Seller has paid an amount in respect of any claim for
breach of any of the Tax Warranties and Purchaser, the
Company or the Subsidiaries shall recover a sum in respect
of the matter giving rise to the claim or shall receive a
Taxation credit or benefit in consequence of such claim or
breach, Purchaser shall make a repayment to Seller, and in
respect of such repayment clause 4 of the Deed of Tax
Indemnity shall apply with only the necessary changes.
7.19 Purchaser shall not be entitled to recover from Seller the
same sum or loss more than once in respect of any claims for
breach of any Warranties.
<PAGE>
<PAGE> 67
7.20 No breach of Warranty or any covenant or undertaking in this
Agreement shall give rise to any right on the part of
Purchaser to rescind or terminate this Agreement following
Completion.
7.21 Where a Warranty is qualified by the words "so far as Seller
is aware", or any similar expression, Seller acknowledges
that it has represented to Purchaser that such Warranty has
been so qualified after due enquiry of directors and senior
managers within the Seller Group and the Group by Seller,
and that Seller has used all reasonable endeavours to ensure
that the statement contained in that Warranty is accurate.
7.22 Any payment made by Seller in respect of any breach of
Warranty shall be treated by Purchaser as far as possible as
a reduction to the Consideration.
8 Announcements
-------------
8.1 Seller and Purchaser shall jointly plan and co-ordinate the
initial press releases and initial public announcements
regarding this Agreement and the text of any such release or
announcement shall be subject to the prior written consent
of Seller and Purchaser. The foregoing shall not apply to
the extent that it is necessary for that Party or its
Affiliate to make such public announcement or statement in
order to comply with a statutory obligation, an obligation
to include information in published or audited accounts, or
with the requirement of a competent government agency, the
Securities and Exchange Commission or other regulatory body,
or a recognised stock exchange on which that Party or such
Affiliate has its shares or oil production or royalty stock
listed, in which event the Party proposing to make such an
announcement or statement shall ensure that the announcement
contains only such information as is required by the
applicable regulations and no further information (unless
the other Party so agrees) and, where reasonably
practicable, issue a copy thereof to the other Party prior
to its release and if not so practicable as soon as possible
thereafter.
9 Notices
-------
9.1 Except as otherwise provided in this Agreement any notice to
be given under this Agreement shall be in writing and shall
be deemed to be duly given if it (or the envelope containing
<PAGE>
<PAGE> 68
it) identifies the party to whom it is intended to be given
as the addressee and:
(a) it is delivered personally; or
(b) it is sent by (i) first class post or airmail or
express or other fast postal service or (ii) the
recorded delivery service or (iii) confirmed telex or
facsimile transmission to the respective addresses
shown in this Agreement or the respective registered or
principal offices for the time being of the relative
company or to such other addresses and/or numbers as
such parties may by notice to all other parties hereto
expressly substitute therefor;
when in the ordinary course of the means of transmission it
would first be received by the addressee in normal business
hours.
9.2 In proving the giving of a notice it shall be sufficient to
prove that the notice was left or that the envelope
containing such notice was properly addressed and posted or
that the applicable means of telecommunications was properly
addressed and despatched (as the case may be).
9.3 Any notice duly given within the meaning of clause 9.1 shall
be deemed to have been both given and received:
(a) if it is delivered in accordance with clause 9.1(a), on
such delivery;
(b) if it is duly posted or transmitted in accordance with
clause 9.1(b) by any of the methods there specified, on
the second (or, when sent airmail, fifth) business day
after the day of posting or (in the case of a notice
transmitted by telex or facsimile transmission) upon
receipt by the sender of the correct answerback or
transmission report.
9.4 For the purposes of this clause 9, "notice" shall include
any request, demand, instructions or other document.
10 Costs and Expenses
------------------
10.1 Seller and Purchaser shall each pay its and its Affiliates'
own costs, expenses, duties and, except as otherwise
expressly agreed in writing, Taxation in relation to the
<PAGE>
<PAGE> 69
preparation and execution of this Agreement, the documents
contemplated hereby or executed pursuant hereto and any
transactions contemplated by this Agreement.
10.2 Without prejudice to any other rights hereunder, if any
amount payable hereunder is not paid when due, the
defaulting Party shall pay interest on such amount from the
due date of payment (after as well as before judgment) at a
rate equal to three per cent. (3%) above the Agreed Rate.
10.3 (a) Seller will indemnify to Purchaser on demand (and the
amount payable under the indemnity may, without
limiting Purchaser's rights, be claimed as a debt or
liquidated demand) an amount equal to all costs and
expenses of the professional advisers to Purchaser
(including, but not limited to, the fees of its
external legal advisers and their out-of-pocket
expenses) and any irrecoverable value added tax
thereon, incurred by Purchaser:-
(i) in investigating the affairs of the Group; and
(ii) in the preparation, execution and carrying into
effect of this Agreement and all other documents
forming part of the sale of the Sale Shares
if either (aa) Purchaser shall exercise its right to
terminate, or not to proceed to Completion of, this
Agreement pursuant to clause 7.6 and either (i) such
termination shall have arisen as a result of the
failure by Seller to remedy an Inconsistency which was
capable of remedy or (ii) if such Inconsistency was not
capable of remedy, such Inconsistency arose as a result
of some act, omission or default of Seller, the Company
or any Subsidiary or (bb) Purchaser shall exercise its
right to terminate this Agreement pursuant to clause
4.6 PROVIDED THAT Seller's liability under this clause
10.3 shall not exceed $2,500,000.
(b) Purchaser shall provide to Seller copies of all
invoices in respect of any costs and expenses referred
to in sub-clause 10.3(a) and, if requested by Seller,
copies of all invoices and receipts in respect of any
out-of-pocket expenses to be reimbursed to any of
Purchaser's professional advisers.
<PAGE>
<PAGE> 70
11 Variation
---------
The terms and conditions of this Agreement shall only be
varied, modified or amended by an agreement in writing
signed by each of the Parties and specifically referring to
this Agreement.
12 Assignment
----------
None of the rights or the obligations of either Party under
this Agreement are assignable without the prior written
consent of the other Party save that Purchaser shall be
entitled to assign the benefit (subject to the burden) of
this Agreement (including the Warranties) to any Affiliate
of Purchaser ("the Assignee") PROVIDED THAT (a) if the
Assignee shall cease to be an Affiliate of Purchaser,
Purchaser shall procure that the Assignee shall re-assign
the benefit and burden of this Agreement to Purchaser or to
another Affiliate of Purchaser; and (b) in the event of such
assignment the provisions of clause 6.7(d) shall not apply.
13 General
-------
13.1 Without prejudice to the provisions of clauses 4.3 and 4.5,
this Agreement shall remain in full force and effect
notwithstanding Completion.
13.2 No waiver by either Party of any breach of a provision of
this Agreement shall be binding unless made expressly and in
writing and any such waiver shall relate only to the matter
to which it expressly relates and shall not apply to any
subsequent or other matter.
13.3 This Agreement shall enure to the benefit of and be binding
upon the respective successors and permitted assigns of the
Parties.
13.4 Completion is without prejudice to the rights which the
Parties have against each other pursuant to the terms of
this Agreement.
13.5 This Agreement (together with the Disclosure Letter and the
Deed of Tax Indemnity) sets forth the entire agreement and
understanding between the Parties in connection with the
sale and purchase described herein and shall supersede all
previous agreements in relation thereto.
<PAGE>
<PAGE> 71
14 Governing Law
-------------
14.1 The construction, validity and performance of this Agreement
and all agreements executed pursuant hereto shall be
governed by the law of England and both Parties hereby
irrevocably submit to the non-exclusive jurisdiction of the
English Courts.
14.2 Seller irrevocably waives (and irrevocably agrees not to
raise) any objection which it may have now or hereafter to
the laying of the venue of any Proceedings in the English
courts and any claim that any such Proceedings have been
brought in an inconvenient forum and further irrevocably
agrees that a judgment in any Proceedings brought in any
English court shall be conclusive and binding upon Seller
and may be enforced in the courts of any other jurisdiction.
15 Agent for Service
-----------------
15.1 Seller irrevocably agrees that any Service Document may be
sufficiently and effectively served on it in connection with
Proceedings in England and Wales by service on its agent
Norose Notices Limited, if no replacement agent has been
appointed and notified to Purchaser pursuant to clause 15.4,
or on the replacement agent if one has been appointed and
notified to Purchaser.
15.2 Any Service Document served pursuant to this clause shall be
marked for the attention of:-
(i) "the Director of Administration" at Norose Notices
Limited (quoting reference MM/Z113841) at its
registered office from time to time; or
(ii) such other person as is appointed as agent for service
pursuant to clause 15.4 at the address notified
pursuant to clause 15.4.
15.3 If the agent referred to in clause 15.1 (or any replacement
agent appointed pursuant to this sub-clause) at any time
ceases for any reason to act as such, Seller shall appoint a
replacement agent to accept service having any address for
service in England and Wales and shall notify Purchaser of
the name and address of the replacement agent; failing such
appointment and notification, Purchaser shall be entitled by
notice to Seller to appoint such a replacement agent to act
on Seller's behalf.
<PAGE>
<PAGE> 72
15.4 A copy of any Service Document served on an agent pursuant
to this clause shall be sent by airmail post to Seller at
its address for the time being for the service of notices
and other communications under clause 9, but no failure or
delay in so doing shall prejudice the effectiveness of
service of the Service Document in accordance with the
provisions of sub-clause 15.1.
15.5 "Service Document" means a writ, summons, order, judgment or
other document relating to or in connection with any
Proceedings.
AS WITNESS whereof this Agreement has been signed by the duly
authorised representatives of the Parties on the day and year
first above written.
<PAGE>
<PAGE> 73
Schedule 1
The Company
SUN OIL BRITAIN LIMITED
-----------------------
Date of incorporation: 3 September 1964
Place of incorporation: Delaware, USA
Registered number: SF349/BR2092
Authorised share capital: 20,000 Ordinary $100 shares
Issued share capital: 13,554 ordinary $100 shares (allotted,
called-up and fully paid)
Shareholders: Sun Company, Inc.
Directors: M. Allen
R. Aiken
D.E. Knoll
V.R. Harlow
J. Lavery
J. Ruddy
R.D. Ballantyne
Secretary: J. Lavery
Auditors: Ernst & Young
Accounting Date: 31st December
Bank accounts: Citibank, London - US$ Account No.
1001086
Citibank, London - Pound Account No.
67709
Citibank, London - Balmoral Field
Operating Account No. 53619
Citibank, London - Glamis Field Account
No. 98582
Citibank, London - Account No. 8002282
Citibank, London - Account No. 3052974
(All accounts have sort code 18-50-08)
VAT registration number: 498392091
Tax residence: United Kingdom
<PAGE>
<PAGE> 74
Schedule 2
The Subsidiaries
A. SUN OIL NORTH SEA LIMITED
-------------------------
Date of incorporation: 19th December 1988
Place of incorporation: England and Wales
Registered number: 2329640
Issued share capital: 1,486,000 ordinary shares fully
paid
Shareholders: Sun Oil Britain Limited (1,485,999
shares)
British Sun Oil Company Limited (1
share)
Directors: V.R. Harlow
M. Allen
R.D. Ballantyne
Secretary: J. Lavery
Auditors: Ernst & Young
Accounting Date: 31st December
Registered office: Plumtree Court, London EC4A 4HT
Bank accounts: None
VAT registration number: 498392091
Tax residence: United Kingdom
<PAGE>
<PAGE> 75
B. BRITISH SUN OIL COMPANY LIMITED
-------------------------------
Date of incorporation: 26th July 1909
Place of incorporation: England and Wales
Registered number: 104274
Issued share capital: 60,000 ordinary shares
Shareholders: Sun Oil Britain Limited (60,000
shares)
Directors: V.R. Harlow
M. Allen
R.D. Ballantyne
Secretary: J. Lavery
Auditors: Ernst & Young
Accounting Date: 31st December
Registered office: Plumtree Court
London EC4A 4HT
Bank accounts: None
VAT registration number: 498392091
Tax residence: United Kingdom
<PAGE>
<PAGE> 76
Schedule 3
Warranties and Representations
Part I
- ------
Purchaser hereby warrants and represents to Seller that:
(a) Purchaser is duly incorporated with limited liability and
validly existing under the laws of England and has all
requisite corporate power to enter this Agreement and
carry out the transaction contemplated hereby.
(b) All necessary corporate action has been taken to
authorise, Purchaser to execute and deliver this Agreement
and perform the transactions contemplated hereby.
(c) The signing and delivery of this Agreement and the
performance of the transactions contemplated by this
Agreement, will not contravene the Memorandum or Articles
of Association of Purchaser and will not contravene or
constitute a default under any provision contained in any
agreement, instrument, law, judgment, order, licence,
permit or consent by which Purchaser or any of its
Affiliates is bound.
Part II
- -------
Seller warrants and represents to Purchaser in respect of itself,
the Company and the Subsidiaries, save as disclosed under the
terms of the Disclosure Letter, as follows. The warranties and
representations shall be deemed to be repeated with substitution
for "the Company" of "SONSL" wherever the context admits.
Warranties are only given in relation to BSOC where specifically
stated.
1 General
-------
1.1 (a) Seller is duly incorporated and is validly existing as
a corporation under the laws of the Commonwealth of
Pennsylvania, USA, and has all requisite corporate
power to enter into this Agreement and carry out the
transactions contemplated hereby.
<PAGE>
<PAGE> 77
(b) The documents which contain or establish Seller's
constitution incorporate provisions which authorise,
and all necessary corporate action has been taken to
authorise, Seller to execute and deliver this Agreement
and perform the transactions contemplated hereby.
(c) The signing and delivery of this Agreement and the
performance of the transactions contemplated by this
Agreement, will not contravene or constitute a default
under any provision contained in any agreement,
instrument, law, judgment, order, licence, permit or
consent by which Seller or any of its or their
Affiliates or any of its assets is bound or affected.
(d) This Agreement constitutes and the other documents
executed by Seller which are to be delivered at
Completion will, when executed, constitute binding
obligations on the Seller in accordance with their
respective terms.
(e) No litigation, arbitration, administrative proceeding,
dispute or judgment against Seller or to which Seller
is a party which might by itself or together with any
other such proceedings have a material adverse effect
on its business, assets or condition and which would
materially and adversely affect its ability to observe
or perform its obligations under this Agreement and the
transactions contemplated hereby, is subsisting or, so
far as Seller is aware, threatened or pending against
Seller or any of its assets.
1.2 (a) the Company is a corporation duly organised, validly
existing and in good standing under the laws of
Delaware and the Subsidiaries are companies limited by
shares incorporated in England and Wales;
(b) the information concerning the Company and the
Subsidiaries (including their capital structure and
their ownership) set out in Schedule 1 and in Schedule
2 is true, complete and accurate in all respects;
(c) the Company has no subsidiary or shareholding in any
company other than the Subsidiaries, and the
Subsidiaries have no subsidiary or shareholding in any
company nor does the Company carry on business in
partnership with any other person nor is it a member of
any corporate or unincorporated body;
<PAGE>
<PAGE> 78
(d) the Articles of Incorporation and By-Laws of the
Company are those registered at Companies House (SF349)
as at the date hereof and fully set out the rights and
restrictions attaching to each class of share capital
of the Company;
(e) the Memorandum and Articles of Association of the
Subsidiaries are those registered at Companies House as
at the date hereof and fully set out the rights and
restrictions attaching to each class of share capital
of each relevant Subsidiary.
(f) since incorporation, the Company has been in continued
existence.
1.3 The Company has filed with the Secretary of the State of
Delaware and at Companies House all documents required to be
filed with the Secretary of the State of Delaware and by the
Companies Acts 1985 to 1989. SONSL has filed at Companies
House all documents required to be filed by the Companies
Acts 1985 to 1989.
1.4 The Company is empowered and duly qualified to carry on
business in all jurisdictions in which its present business
is now carried on, and the Company's business has at all
times and in all respects been carried on intra vires.
1.5 No alteration has been made to the Articles of Incorporation
and By-Laws of the Company or Memorandum and Articles of
Association of SONSL which has not been disclosed to the
Purchaser in the Disclosure Letter and (save as expressly
provided herein) no such alteration will be made pending
Completion without the prior written consent of the
Purchaser (not to be unreasonably withheld or delayed).
1.6 The Company has not executed any power of attorney or
conferred on any person other than its directors any
authority (express, implied or ostensible) to enter into any
transaction on behalf of or to bind the Company in any way.
1.7 The Company does not carry on, and has not in the past three
years carried on, any business under any name other than its
corporate name.
<PAGE>
<PAGE> 79
1.8 The execution and delivery of, and the performance by Seller
of its obligations under, this Agreement and the Deed of Tax
Indemnity will not:-
(a) result in a breach of any provision of the Articles of
Incorporation and By-Laws or, as the case may be,
memorandum or articles of association of Seller or of
the Company; or
(b) result in a breach of, or constitute a default under or
enable any person to terminate or relieve any person
from an obligation under any instrument to which Seller
or the Company is a party or by which Seller, or the
Company is bound; or
(c) result in the Company losing the benefit of any permit,
asset, licence, grant, subsidy, right or privilege
which it enjoys on the date hereof in any jurisdiction;
or
(d) result in a breach of any order, judgment or decree of
any court or governmental agency to which Seller or the
Company is a party or by which Seller or the Company is
bound; or
(e) require the consent of the shareholders of Seller or
the Company or of any other person.
1.9 No indebtedness (actual or contingent) and no contract or
arrangement other than at arms' length will at Completion be
outstanding between the Company or any Subsidiary and Seller
or any other group company of the Seller or any person a
director of or connected with Seller or any such other group
company.
2 Audited Accounts, Accounts and financial matters
------------------------------------------------
2.1 The Audited Accounts:-
(i) were produced in accordance with the requirements of
all relevant statutes and accounting standards,
principles and practices generally accepted in the
United Kingdom at the time they were audited;
(ii) show a true and fair view of the assets and
liabilities of the Company and its subsidiaries as at,
and the profits of the Company and the Subsidiaries
<PAGE>
<PAGE> 80
for the two accounting reference periods ended on, 31
December 1994 and 31 December 1995 respectively; and
(iii) in the case of consolidated financial statements, show
a true and fair view of the state of affairs of the
Group as a whole.
2.2 Full provision has been made in the Audited Accounts for all
actual liabilities of the Company and its Subsidiaries
outstanding at 31 December 1994 and 31 December 1995
respectively and proper provision (or note) in accordance
with accounting principles generally accepted in the United
Kingdom at the time they were audited has been made in the
Audited Accounts for all other liabilities of the Company
and its subsidiaries then outstanding.
2.3 The Accounts when prepared and audited will comply in all
respects with clause 3.6(c) PROVIDED THAT there shall be no
liability for breach of this warranty to the extent that the
matter giving rise to such breach has been taken into
account in determining the Net Working Capital Adjustment in
accordance with clause 3.
2.4 The Company and each of the Subsidiaries have properly kept
and maintained all necessary books of account (reflecting in
accordance with generally-accepted accounting principles and
practices all transactions effected by it or to which it is
or has been a party), minute books, records, register of
members or shareholders and other statutory books. All such
documents contain full and accurate records of all matters
required to be recorded therein, are in the possession of
the relevant company and no allegation that any of the same
is incorrect or should be rectified has been received by the
relevant company.
2.5 The accounting records of the Company and each of the
Subsidiaries are up-to-date and contain complete and
accurate details of the business activities of the Company
and each of the Subsidiaries and of all matters required by
the Companies Acts (or equivalent provisions in the US) to
be entered in them.
2.6 Each Subsidiary has notified to the Registrar of Companies
31st December as being its accounting reference date
pursuant to the Companies Act 1985.
2.7 The Company has not engaged in any financing (including
without prejudice to the generality of the foregoing the
incurring of any borrowing or any indebtedness in the nature
<PAGE>
<PAGE> 81
of borrowing including without limitation liabilities in the
nature of acceptance or acceptance credits) of a type which
would not be required to be shown or reflected in the
Accounts.
3 Shares and distributions
------------------------
3.1 The Sale Shares constitute the entire issued share capital
of the Company and the details of the shareholders set out
in Schedules 1 and 2 are true, complete and accurate. All
the Sale Shares are validly issued, fully paid and non-
assessable with no personal liability attaching to the
ownership thereof. There is no option, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance on over or affecting the Sale Shares or the
shares of SONSL and there is no agreement or commitment
whether actual or contingent (save as provided in this
Agreement) to give or create any of the foregoing, and no
person has made any claim to be entitled to any of the
foregoing. Seller is entitled to sell and transfer or
ensure the sale and transfer of the full legal and
beneficial ownership in the Sale Shares to Purchaser on the
terms set out in this Agreement.
3.2 No share or loan capital of the Company is now under option
or is agreed conditionally or unconditionally to be created
or issued or put under option.
3.3 The Company has not at any time purchased or redeemed or
repaid any of its share capital.
3.4 Since the Economic Date, no dividend has been declared or
paid on and no distribution of capital made in respect of
any share capital, and no loan or loan capital has been
repaid in whole or in part and the Company is not proposing
to make any such distributions.
3.5 The Company:
(a) is not the holder or beneficial owner of and has not
agreed to acquire any share or loan capital of any
company (whether incorporated in the United Kingdom or
elsewhere) other than the Subsidiaries; and
(b) has not outside the United Kingdom any branch, agency
or place of business, or any permanent establishment
(as that expression is defined in the relevant double
<PAGE>
<PAGE> 82
taxation relief order current at the date of this
agreement) which constitutes a source of income for
any Taxation purposes separate from its trade of UKCS
oil and gas exploration and exploitation and sources
of income ancillary thereto.
3.6 Except as required by this Agreement, there are no
agreements or arrangements in force which provide for the
present or future issue, allotment or transfer of, or grant
to any persons the right (whether conditional or otherwise)
to call for the issue, allotment or transfer of, any share
or loan capital of the Company (including any option or
right of pre-emption or conversion).
4 Insurance
---------
4.1 The Company has, either itself or through the relevant
Operators, effected all insurances required by law or in
terms of the relevant JOA to be effected by it.
4.2 The Disclosure Letter contains in Appendix 2 full details of
the current insurance cover of the Company including insured
values. True and complete copies of all the policies are
attached to the Disclosure Letter. All such policies are in
full force and effect and no claims are outstanding and no
event has occurred which might give rise to any claim.
4.3 All premiums due on such policies have been paid. So far as
Seller is aware, all the other conditions of the said
policies have been performed and observed, and, so far as
Seller is aware, nothing has been done or has been omitted
to be done whereby any of the said policies has or may
become void or voidable.
4.4 There is no insurance claim by the Company pending or
outstanding in relation to amounts totalling in excess of
10,000 pounds.
4.5 The Seller was covered by insurance policies against costs
in respect of third party claims, control of wells and
seepage in relation to each of the wells which have been
drilled in the areas covered by the Licences, the Seller is
so covered in respect of all wells currently being drilled
and will remain so covered in respect of all the wells
drilled up to Completion.
<PAGE>
<PAGE> 83
5 Taxation
--------
5.1 All returns, notifications, computations and payments which
should have been made or given by the Company for any
Taxation and Tax (as defined in paragraph 1(a) of Schedule
12) purpose were made or given within the requisite periods
and are up-to-date, correct and on a proper basis; and
(apart from matters handled by the relevant responsible
person for any oil field in relation to PRT) none of them is
the subject of any dispute with any Taxation Authority nor
has any Taxation Authority investigated or notified the
Company that it intends to investigate the tax affairs of
the Company other than by way of an investigation of a
regular or routine nature.
5.2 All particulars furnished to any Taxation Authority in
connection with the application for any consent or clearance
on behalf of or affecting the Company fully and accurately
disclosed all facts and circumstances material for the
decision of those authorities.
5.3 The Company is not and has never been a close company within
the terms of section 414 ICTA 1988.
5.4 In relation to Value Added Tax ("VAT"):
(a) the Company is a registered and taxable person for the
purposes of the Value Added Tax Act 1994 ("VAT") and
has complied in all material respects with the VAT and
any statutory modification or re-enactment thereof and
all orders, provisions, directions or other conditions
made or imposed thereunder or under any other law
relating to VAT;
(b) the companies in the Group are treated under section
43 VAT as members of a group for VAT purposes; and
(c) all amounts due to be paid to HM Customs & Excise
prior to Completion will have been paid, and at the
date hereof no dispute exists between the Company and
HM Customs & Excise and there is no present
circumstance which is likely to give rise to any such
dispute.
<PAGE>
<PAGE> 84
5.5 Seller is not aware that any other person has failed to pay
any tax which is due and payable in any existing
circumstances such that any member of the Group may become
liable or assessable (whether as agent, oil extraction
licence-holder or otherwise) for any payment of Taxation
which remains outstanding and the primary liability for
which falls upon any other person.
5.6 No surrender of losses or other amounts by way of group
relief or consortium relief has been or will be made in
respect of any period ending prior to the Completion Date
otherwise than between the Company and SONSL.
5.7 The Company has properly operated the P.A.Y.E. system,
deducting tax as required by law from all payments to or
treated as made to or benefits provided for employees, ex-
employees or independent contractors of it (including any
such payments within Section 134 ICTA 1988) and duly
accounted to the Inland Revenue for tax so deducted and has
complied with all its reporting obligations to the Inland
Revenue in connection with any such payments made or
benefits provided.
5.8 The Company has not at any time after 5th April 1965 repaid
or agreed to repay or redeemed or agreed to redeem or
purchased or agreed to purchase (or made any contingent
purchase contract within the meaning of Section 165
Companies Act 1985) in respect of any of its issued share
capital or any class thereof. Further, the Company has not
after 5th April 1965 capitalised or agreed to capitalise in
the form of shares, debentures or other securities, or in
paying up amounts unpaid on any shares debentures or other
securities, any profits or reserves of any class or
description or passed or agreed to be passed any resolution
to do so.
5.9 All documents required to be stamped with stamp duty in the
United Kingdom have been duly stamped.
6 Material transactions
---------------------
6.1 Since the Economic Date:
(a) the business of the Company has been carried on in the
ordinary course and so as to maintain the same as a
going concern;
(b) no shareholders' resolutions have been passed;
<PAGE>
<PAGE> 85
(c) other than in the ordinary course of business, no
contract, liability or commitment has been entered
into by the Company which is of a long-term or unusual
nature or which involved or could reasonably be
expected to involve an obligation of a material nature
or magnitude (a liability for expenditure in excess of
25,000 pounds sterling being treated as material for
this purpose);
(d) other than in the ordinary course of business the
Company has not disposed of, or agreed to dispose of,
any business or any assets having in the latter case a
value in excess of 25,000 pounds sterling;
(e) no debt owing to the Company has been deferred,
subordinated or written off or has proved to any
extent irrecoverable.
6.2 The Company has not created any Encumbrance over any of its
assets (save for the Underleases and liens arising in the
ordinary course of business) which is still outstanding.
6.3 Compliance with the terms of this Agreement does not and
will not conflict with, or result in the breach of, or
constitute a default under any agreement or other document
to which the Company is a party or by which it is bound, or
any provision of the By-laws or Articles of Incorporation of
the Company or (in the case of the Subsidiaries) Memorandum
or Articles of Association or any Encumbrance, lease,
contract, order, judgment, award, injunction, regulation or
other restriction or obligation of any kind by which or to
which the Company or any asset of the Company is bound or
subject.
6.4 So far as Seller is aware, the Company has not committed, or
omitted to do, any act or thing which could give rise to any
fine or penalty or which could, so far as Seller is aware,
affect the validity or enforceability of any agreement to
which it is a party; nor, so far as Seller is aware, has the
Company committed or omitted to do any act or thing which
breaches any applicable law or regulation or violates any
order, decree or judgement of any court or any governmental
or regulatory body of the United Kingdom or in the United
States, or the European Union; nor, so far as Seller is
aware, is the Company a party to any agreement, practice or
arrangement which:
(a) contravenes the provisions of the Trade Descriptions
Acts 1968 and 1972;
<PAGE>
<PAGE> 86
(b) contravenes, or is invalidated (in whole or in part)
by, or is subject to registration under, the
Restrictive Trade Practices Acts 1976 and 1977;
(c) contravenes, or is invalidated (in whole or in part)
by, the provisions of the Resale Prices Act 1976;
(d) contravenes any provisions of the Treaty of Rome (as
amended); or
(e) contravenes any other anti-trust, anti-monopoly or
anti-cartel legislation or regulations.
6.5 (a) No order has been made, or petition presented, or
resolution passed for the winding-up of the Company or
for an adminstration order in respect of the Company;
no distress, execution or other process has been
levied in respect of the Company which remains
undischarged; and there is no unfulfilled or
unsatisfied judgment or court order outstanding
against the Company and no administrative receiver or
receiver or receiver and manager has been appointed by
any person of its business or assets or any part
thereof.
(b) The Company is not insolvent or unable to pay its
debts within the meaning of Section 123 Insolvency Act
1986.
6.6 (a) The Company is not:
(i) in default under any agreement, obligation or
arrangement to which it is a party, or in respect
of any other obligations or restrictions binding
upon it;
(ii) in default under any obligations existing by
reason of membership of any association or body;
(iii) liable in respect of any representation or
warranty (whether express or implied), or any
matter giving rise to a duty of care on its part.
(b) No threat or claim of default under any agreement,
obligation or arrangement has been made, and is
outstanding, against the Company.
6.7 No guarantee, or agreement for indemnity or for suretyship,
given by the Company is outstanding.
<PAGE>
<PAGE> 87
6.8 The Company is not a party to any contract which is material
to its financial or trading position other than the
contracts made available to Purchaser for inspection in the
Data Room.
6.9 The Company is under no liability to repay any investment or
other grant or subsidy made to it by the Department of Trade
and Industry or any of its predecessors or any other body.
6.10 The Company has taken no steps pursuant to a joint venture
agreement for the development of opportunities for petroleum
production operations made between it and Brown & Root
Limited ("B&R") and dated 1st January 1995 to establish a
joint venture or any other manner of co-operation or
operation to pursue such opportunities.
6.11 The Company does not have outstanding at the date hereof any
foreign exchange transactions, derivative transactions or
any other currency transactions.
7 Employees and The Pension Scheme
--------------------------------
7.1 At Completion the Company will have no employees other than
the Employees and the Subsidiaries will have no employees.
7.2 A list of the names, jobs and full details of the terms of
employment (including the emoluments) of all of the
Employees is set out in the Disclosure Letter.
7.3 Full particulars of the terms of all consultancy agreements
with the Company are contained in the Disclosure Letter.
7.4 Full details of any benefit received by any Employees
otherwise than in cash, and of any benefit received by any
Employees in cash which is related to sales, profits or
performance, or which is otherwise variable (other than
normal overtime), are set out in the Disclosure Letter.
7.5 Any contract of employment to which the Company is a party
can be terminated by the employing company without damages
or compensation (other than that payable by statute) by
giving at any time only the minimum period of notice
applicable to that contract which is specified in section 49
of the Employment Protection (Consolidation) Act 1978.
<PAGE>
<PAGE> 88
7.6 No director or employee of the Company has given notice
terminating his contract of employment or is under notice of
dismissal or has made or threatened any claim against the
Company in connection with or arising from his employment
and there is no liability outstanding to or in respect of
any director or employee or former director or employee of
the Company except for remuneration or other benefits
accruing due and no such remuneration or other benefit which
has fallen due for payment has not been paid other than his
salary for the month current at the date of this Agreement.
7.7 During the period of six months ending with the date of this
Agreement, the Company has not terminated the employment of
any of their respective former employees.
7.8 There are no loans owed by any of the Employees to the
Company. Since the Economic Date, the Company has not
entered into any formal or informal agreement to amend or
change the emoluments or other terms and conditions of any
director or employee of the Company (whether such amendment
or change is to take effect prior to or after Completion),
and no such change, and no negotiation or request for such a
change, is due or expected within six months from the date
of this Agreement.
7.9 Since the Economic Date, so far as the Seller is aware the
Company has not acted in breach of the terms and conditions
of the employment of any of its respective employees or
directors or in breach of the terms of any consultancy
arrangements with the Company.
7.10 There is no plan, scheme, arrangement, policy, custom or
practice under which the Company is under any obligation
(whether legal or otherwise) to pay any enhanced redundancy
or severance payment to any Employees dismissed by reason of
redundancy.
7.11 The only scheme or arrangement in force for the provision of
"relevant benefits" (within the meaning of section 612(1)
ICTA 1988) for the Employees is the Sun Group (UK) Pension
and Life Assurance Plan of which particulars are set out in
the Disclosure Letter.
7.12 Save as described in warranty 7.11 above, the Company is not
paying, nor is under any liability (actual or contingent) to
pay or secure (other than by payment of employers'
contributions under national insurance or social security
<PAGE>
<PAGE> 89
legislation), any pension or other benefit on retirement,
death or disability or on the attainment of a specified age
or on the completion of a specified number of years of
service.
7.13 There is no dispute between the Company and any elected
representatives of any trade union or other organisation
formed for a similar purpose existing, pending or threatened
and there is no collective bargaining agreement or other
arrangement (whether binding or not) to which the Company is
a party.
7.14 The Company has no outstanding undischarged liability to pay
to any governmental or regulatory authority in any
jurisdiction any contribution, taxation or other impost
arising in connection with the employment or engagement of
personnel by the Company.
7.15 So far as the Seller is aware the Company has at all
relevant times complied with all its obligations under
statute and otherwise concerning the health and safety at
work of its respective employees, and there are no claims
threatened or pending by any employee or third party in
respect of any accident or injury which are not fully
covered by insurance.
7.16 So far as the Seller is aware the Company has at all
relevant times complied with all its obligations under
statute or otherwise concerning the employment of its
employees and all plans for the provision of benefits to its
employees comply in all respects with all relevant statutes,
regulations or other laws and all necessary consents and
appraisals in relation to such plans have been obtained.
7.17 Save for the Pension Scheme the Company is not a party to
nor participates in nor contributes to any scheme,
arrangement or agreement (whether legally enforceable or
not) for the provision of any pension, retirement, death,
incapacity, sickness, disability, accident or other like
benefits (including the payment of medical expenses) for any
present or past employee of the Company or of any
predecessor to all or any part of its business (a "Relevant
Employee") or for the widow, widower, child or dependent of
any Relevant Employee.
<PAGE>
<PAGE> 90
7.18 Save under the Pension Scheme neither the Company nor any
member of Seller's Group:
(a) has given any undertaking or assurance (whether legally
enforceable or not) to any Relevant Employee or to any
widow, widower, child or dependent of any Relevant
Employee as to the continuance, introduction,
improvement or increase of any benefit of a kind
described in 7.17 above; or
(b) is paying or has paid any benefit of a kind described
in 7.17 above to any Relevant Employee or to any widow,
widower, child or dependent of any Relevant Employee.
7.19 Following payment by the Company of 1.4 million pounds to
Brown & Root Limited, confirmation of which has been
disclosed to Purchaser in the form of a receipted invoice of
Brown & Root Limited dated 19th May, 1995, there are no
outstanding liabilities or obligations (whether of a payment
nature or otherwise) in relation to the Transferees (as
defined in clause 1 of the Brown & Root Agreement) arising
out of or in connection with the Brown & Root Agreement or
the transactions contemplated thereby.
8 Real Property
-------------
8.1 The particulars of each of the Premises shown in Part 1 and
Part 2 of Schedule 5 and of each of the Underleases shown in
Part 3 of Schedule 5 are true and correct and, save for the
Excluded Lease, the Company has no other interest in land,
whether by way of lease, licence, option, pre-emption or
otherwise and does not occupy any other premises.
8.2 Save for the transfer of the Excluded Lease by the Company
to Sun Oil Company (U.K.) Limited the Company will not at
Completion be nor is it now under any obligation to
purchase, lease or dispose of any land or buildings.
8.3 Copies of the Leases relating to the Premises and of the
Underleases and of all material title deeds relating to the
Premises have been disclosed to Purchaser. Such copies are
true, complete and accurate and other than the Leases and
the Underleases there are no leases, subleases, licences or
other occupational rights relating to the Premises.
<PAGE>
<PAGE> 91
8.4 Except in relation to the Premises and the Excluded Lease
the Company has no existing or contingent liabilities in
respect of any premises previously occupied or owned by it
or in which it held any interest whether as guarantor or
otherwise, including, without limitation, leasehold premises
assigned or otherwise disposed of.
8.5 The lease, sub-lease or tenancy for any of the same under
which each of the Premises is held and each of the
Underleases is subsisting.
8.6 None of the Leasehold Properties is used for any purpose
other than as office accommodation and the Freehold Property
is used as a car park (in each case "the Current Use").
8.7 The Company has not received any notice that, and Seller is
not aware that, there is any outstanding dispute, claim,
notice or complaint which adversely affects the Current Use
of any of the Premises.
8.8 The Company and Seller have not received any notice of the
breach by the Company of any restriction, condition,
agreement, obligation or liability (including, without
prejudice to the generality of the foregoing, any imposed by
or pursuant to any lease, sub-lease, tenancy or agreement
for any of the same and whether the Company is the landlord
or the tenant thereunder affecting the Premises nor is the
Company or Seller aware of any material breach of any of the
same.
8.9 In relation to any lease, sub-lease or tenancy for the same
under which the Company is landlord:
(a) the rents collected have not exceeded the sums lawfully
recoverable;
(b) no forfeiture or irritancy proceedings have been taken
or are contemplated by the Company; and
(c) no notice of breach has been served by the Company
which is still outstanding.
8.10 During the time in which the Company has occupied the
Premises, it has experienced no problems which are currently
outstanding in using the Premises for the Current Use.
<PAGE>
<PAGE> 92
8.11 In respect of those of the Premises which are subject to the
Underleases no schedules of dilapidations or notices of
material disrepair have been served by the Company which
have not been complied with.
9 Licence Interests
-----------------
9.1 (a) The Company is the sole beneficial owner of the Licence
Interests.
(b) The identity of the licensee in respect of each Licence
is shown in the relevant Part of Schedule 4, and where
the licensee is stated to be BSOC the licence is held
subject to the terms of an agreement under which the
benefit and burden of the Licence is exclusively
attributable to whichever of the Company and SONSL is
the beneficial owner of the relevant Licence Interest.
9.2 Subject to the provisions of the Licensed Interest Documents
(which expression included the OPS Trust Deed) (a true and
complete copy of which was included in the Data Room), no
mortgage, charge (whether fixed or floating), pledge, lien,
encumbrance or other security or net profit or royalty
interest is in existence and in force over the Licence
Interests nor, subject as aforesaid, is there in effect any
agreement or commitment to create the same; nor are there
any other matters not disclosed to Purchaser which restrict
the Company's ability freely to dispose of the Licence
Interests or any Petroleum attributable thereto.
9.3 The Company has not committed any breach of the Licences or
the OPS Trust Deed or any of the Licensed Interest Documents
or received notice that any of the parties to any of the
above-mentioned documents has committed any breach of any of
the above mentioned documents, which breach, at the date of
making this statement, is of a material nature and is
subsisting. So far as Seller is aware, no Licence Operator
is in breach of its obligations under any Licence.
9.4 So far as Seller is aware, the Licences and all rights and
interests thereunder or deriving therefrom of Company are in
full force and effect. No act or omission of the Company,
or, so far as Seller is aware, of any other licensee of the
Licences, or any of them, has occurred which would entitle
the Secretary to revoke the Licences or any of them, and no
notice has been given to the Company or, so far as Seller is
<PAGE>
<PAGE> 93
aware, to any other licensee of the Licences or any of them,
by the Secretary of any intention to revoke the Licences or
any of them.
9.5 So far as Seller is aware no Licence is in the course of
being surrendered in whole or in part and no proposal to
surrender the whole or any part of any Licence has been made
by the Company.
9.6 So far as Seller is aware, none of the current licensees of
the Licences or the current parties to any JOA or UOA have
given any notice of withdrawal from the Licence, JOA or UOA.
9.7 All accrued obligations and liabilities imposed by the
Licences, including without limitation the work obligations
arising from the Licences, have been duly fulfilled and
discharged and there is no outstanding work obligation
(including any obligation to submit any development or other
programme) to be fulfilled under the Licences or any of them
and no notice has been received from the Secretary
indicating that any additional work obligation is required
under the Licences or any of them.
9.8 The Licensed Interest Documents are the only documents of
which Seller is aware which govern or relate to the
creation, existence and validity of the Licence Interests,
other than those which are otherwise disclosed in the
Appendix to the Disclosure Letter.
9.9 The Licences constitute all licences, permits, contracts or
concessions in or by which the Company holds an interest to
explore or search, bore for, get, produce or develop
Petroleum.
9.10 The Company has and, so far as Seller is aware, the relevant
Licence Operator has made all returns relating to Royalty
and petroleum revenue tax relating to the Licences and these
are up to date and there is no dispute concerning them.
9.11 All amounts due as Royalty in respect of the Licences have
been settled within the permitted time limits.
9.12 No sole risk or non-consent operations have been formally
proposed or carried on in respect of the Licences and Seller
is not aware of any indication that any such operations may
be proposed.
<PAGE>
<PAGE> 94
9.13 The Company has kept proper and consistent accounts relating
to operations conducted under the JOAs and such accounts are
up to date and there has been no change in any practice and
policy since the Economic Date insofar as such a change
might affect the valuation of assets or the recording of
expenditure or receipts relating to the JOAs in such
accounts.
9.14 No vote to remove any Licence Operator is pending or so far
as Seller is aware, is proposed and no Licence Operator is
in the course of resignation.
9.15 So far as the Seller is aware all licences, agreements,
consents, permissions and approvals (including planning
consents and approvals) necessary for the conduct of
operations which have been carried out under the Licences
have to the knowledge of the Seller been duly obtained and
complied with and Seller is not aware of any matter which
would prevent or delay to a material degree the obtaining of
any such licences, agreements, consents, permissions or
approvals which were necessary for the conduct of planned
exploration, appraisal or development operations under the
Licences.
9.16 The Company is not party to any area of mutual interest
agreement, bidding agreement or similar rights or
obligations.
9.17 The Company is entitled to attend and vote at all meetings
of operating and other committees established in connection
with each Licence and is entitled to cast votes thereat
which are proportionate to the Licence interests in the area
the subject of the Licence in question.
9.18 The Company has no obligation to make payments in excess of
its Licence Interests.
9.19 The Company or the relevant Subsidiary has in its possession
or is entitled to receive all data and documentation
obtained jointly by the Licensees under each Licence in
respect of which it has an interest.
9.20 Since 1st January 1996, the Company has not given or
received from any other current party to any JOA any notice
of any assignment of any interest currently subsisting under
any Licence or JOA.
<PAGE>
<PAGE> 95
9.21 Save as expressly provided in the Licences, there are no
subsisting governmental restrictions nor, to the best of
Seller's knowledge and belief, third party rights binding on
the Company which might impede or hinder the carrying out of
operations under any Licence.
9.22 Neither the Company nor any of the Subsidiaries has any of
its know how, records, systems, controls, data or
information recorded, stored, maintained, operated or
otherwise dependent upon or held by any means, including any
electronic, mechanical or photographic process, whether
computerised or not which (including all means of access)
are not in its exclusive possession and under its direct
control.
9.23 Neither the Company nor any of the Subsidiaries carries on
nor has carried on in the three years preceding this
Agreement carried on any business other than that of
exploring for and producing Petroleum.
9.24 So far as Seller is aware, no provision of any of the
Licensed Interest Documents providing for the suspension of
the obligations of any party or which would excuse any party
from performance has come into and remains in operation.
10 Assets
------
10.1 The Company owns and will at Completion own all the assets
included in the Accounts and all other assets (tangible or
intangible) used for the purpose of its business at the date
hereof and all assets acquired since the Economic Date and
prior to Completion both legally and beneficially free from
all third party rights and each of those assets capable of
possession is in the possession of the Company and situated
in the United Kingdom or the UKCS.
10.2 No rental payable under any equipment lease to which the
Company is a party has been increased since the Economic
Date and, in particular, all such equipment has at all
relevant times been used for a qualifying purpose within the
meaning of Section 39 CAA 1990.
<PAGE>
<PAGE> 96
10.3 Since the Economic Date there has been no material adverse
change in the financial or trading position of the Company
other than as may have been caused by factors in the public
domain and/or outside the Company's or Seller's reasonable
control, and the Company has not disposed of any of its
assets except in the course of carrying on business in
accordance with clause 4.1(f).
10.4 No event has occurred or is subsisting which constitutes or
result in or would with the giving of notice and/or lapse of
time constitute or result in a default or the acceleration
of any obligation under any agreement or arrangement to
which the Company is a party or by which it or any of its
properties, revenues or assets are bound.
10.5 The Company has not given any guarantee, indemnity, warranty
or bond incurred any other similar obligation or created any
security for or in respect of liabilities, actual or
contingent, of any other person.
10.6 The level of inventory of the Company as shown in the "Stock
Balance and Valuation Reports" has not been materially
reduced since the Economic Date save in the ordinary course
of business.
11 Litigation and wrongful acts
----------------------------
11.1 The Company is not subject to any outstanding order, decree
or court stipulation engaged in any capacity in any
litigation, arbitration, administrative prosecution or other
legal proceedings or in any proceedings or hearings
including (without limitation) in relation to the Licence
Interests, and there are no such proceedings pending or
threatened or any proceedings in respect of which the
Company is or might be liable to indemnify the other person
concerned therein; nor are there, in the reasonable opinion
of Seller, any claims, disputes, facts or events which are
likely to give rise to any such proceedings. This warranty
is deemed to be qualified by the rider "so far as Seller is
aware" insofar as it relates to Licence Interests in respect
of which neither the Company nor the Subsidiary is the
Operator.
11.2 So far as Seller is aware there are no governmental
investigations or inquiries or disciplinary proceedings in
being directly relating to the Company, none are pending or
<PAGE>
<PAGE> 97
threatened and so far as Seller is aware there are no facts
likely to give rise to such investigation, inquiry or
proceedings.
11.3 So far as the Seller is aware the Company has not committed
nor is it liable for any criminal, illegal, unlawful or
unauthorised act or breach of any obligation or duty whether
imposed by or pursuant to statute, contract or otherwise,
and no claim that it has or is remains outstanding against
the Company.
11.4 No warranty claim has been made by or (if applicable)
against the Company and so far as Seller is aware, there are
no facts, matter or circumstances which may give rise to a
right by the Company to make a warranty claim against the
relevant contracting parties or (if applicable) vice versa
in respect of the following:
(a) the Sale and Purchase Agreement dated 22 March 1994
between Lasmo North Sea PLC and the Company for the
sale of P199 and the Ninian Field and Columba Terraces;
(b) the Sale and Purchase Agreement dated 22 March 1994
between Lasmo North Sea PLC and the Company relating to
the Company's interest in Birch;
(c) the Sale and Purchase Agreements dated 29 July 1994
between the Company, Lasmo (TNS) Limited, Hardy North
Sea Limited, Deminex UK Oil and Gas Limited relating to
the Company's interest in Birch.
11.5 In respect of any JOA, the relevant Licence Operator has not
given notification to the relevant operating committee of
any accident or dispute the financial effect of which
exceeds the monetary amount provided in the relevant JOA as
requiring such notification.
11.6 All notifications received by the Company within the
previous six months from third parties of an intention to
claim relief pursuant to force majeure provisions in any
contract of which the Company is a party are disclosed in
the Disclosure Letter.
<PAGE>
<PAGE> 98
12 Computer Systems
----------------
In this paragraph 12:-
"Computer Systems" means all computer systems used by or for
the benefit of the Company at any time, including computer
processors, associated and peripheral equipment, computer
programs, technical and other documentation, and data
entered into or created by such computer systems from time
to time.
12.1 The Computer Systems have been satisfactorily maintained and
supported and have the benefit of an appropriate maintenance
and support agreement terminable by the contractor by not
less than 24 months' notice.
12.2 In the event that any person providing maintenance or
support services for the Computer Systems ceases or is
unable to do so, the Company has all necessary rights to
obtain the source code and all related technical and other
information free of charge and to procure the carrying out
of such services by employees or by a third party.
12.3 The Company has adequate procedures to ensure internal and
external security of the Computer Systems, including
procedures for taking and storing on-site and off-site back-
up copies of computer programs and data.
13 Information
-----------
13.1 The information contained in schedules 4, 5, 6 and 9 and is
true, complete and accurate in all respects.
13.2 All data, information and documents made available for
inspection by the Purchaser is listed in the Appendices to
the Disclosure Letter, and the copies made available are
true copies, complete and up-to-date, and contain all
material information of which Seller is aware (other than
data in the public domain relating to oil prices, exchange
rates and similar external economic and political matters)
which is relevant to the business of the Company and
materially affects the value of the Sale Shares.
<PAGE>
<PAGE> 99
14 Environmental Matters
---------------------
14.1 So far as Seller is aware the Company has complied in all
material respects at all material times with Environmental
Law.
14.2 So far as Seller is aware all Environmental Permits shall
have been obtained and are in full force and effect and the
Company has complied in all material respects and at all
material times with all material conditions and limitations
in all Environmental Permits.
14.3 The Company has received no communication revoking,
suspending, modifying or varying any of the Environmental
Permits and the Seller is not aware of any circumstances
which might give rise to any such communication being
received.
14.4 The Company has not received at any time any written
communication in respect of which an existing failure to
comply with which would constitute a breach of Environmental
Law or which directly concerns any actual and material
Environmental Liability on the part of the Company and
Seller is not aware of any circumstances which might give
rise to any such communication being received.
14.5 The Company has not received at any time any written
communication (which remains current) in respect of the
preparation or execution of an abandonment or
decommissioning program and, in respect of any installation
or facilities, has not been required to provide funds or
security for any such programs or related activity.
14.6 So far as Seller is aware there have been no spills,
leakages, escapes, discharges, emissions or other releases
of Hazardous Materials or Waste into the Environment at or
originating from the Premises or any of the plant,
equipment, installations, pipelines, vessels or facilities
associated at any time with the Licences which it is
reasonably foreseeable could give rise to the Company
incurring a material Environmental Liability.
14.7 The Company has not received any complaints from third
parties and there have been no investigations by any
competent authority relating to an alleged breach of
Environmental Law by the Company or (so far as Seller is
<PAGE>
<PAGE> 100
aware) any Operator or to a potential Environmental
Liability which could be incurred by the Company which
remain outstanding as at the date of this Agreement.
15 FPV
---
In respect of the FPV:
(a) As at Completion the FPV will continue to be located in
Block 16/21 of the UKCS and will be capable of being
operated substantially in the manner in which it is
operated on the date hereof.
(b) The Company has complied with all applicable laws and
regulations in respect of, or in connection with the
operations of the FPV;
(c) All necessary licences, consents, permits and
authorities have been obtained by the Company in
relation to the operations of the FPV and all such
licences, consents, permits and authorities are valid
and subsisting and Seller is not aware of any reason,
matter or circumstance which may result in such
licences, consents, permits and authorities being
suspended, cancelled or revoked; including, without
limitation, the pending re-certification of the FPV in
accordance with application regulations.
<PAGE>
<PAGE> 101
Schedule 4
Licences, and other related information
Part A (1)
----------
Licence P.201
1 Block 16/21a
2 Licensee The Company
3 Field Balmoral/Stirling/Glamis
4 Percentage Interest in Licence 62.00%
5 Unit Interest Balmoral 51.5381%
Stirling 37.2000%
6 JOA 21.08.73
7 UOA 30.10.86 - Balmoral
25.08.92 - Stirling
8 Licence Operator The Company
9 Unit Operator The Company
10 Pipeline System Brae/Forties
11 Pipeline Operator BP Exploration
Operating Company Ltd
12 Terminal Cruden Bay
13 Terminal Operator BP Exploration Operating
Company Ltd
<PAGE>
<PAGE> 102
Schedule 4
Part A(2)
---------
Licence P.344
1 Block 16/21b, 16/21c
2 Licensee Sun Oil North Sea Limited
3 Field Balmoral/Stirling
4 Percentage Interest in Licence 44.20% in P.344 (only in
so far as it relates to
those portions of Blocks
16/21b and 16/21c lying
within the Balmoral Unit
Area and the Stirling
Unit Area respectively).
5 Unit Interest Balmoral 7.4583%
Stirling 17.6800%
6 JOA 18.02.82 (18.04.85 -
Supplemental Operating
Agreement Splits Master
Operating Agreement of
18.02.82 into 3)
7 UOA 30.10.86 - Balmoral
25.08.92 - Stirling
8 Licence Operator Sun Oil North Sea Limited
9 Unit Operator The Company
10 Pipeline System Brae/Forties
11 Pipeline Operator BP Exploration Operating
Company Ltd
12 Terminal Cruden Bay
13 Terminal Operator BP Exploration Operating
Company Ltd
<PAGE>
<PAGE> 103
Schedule 4
Part B
------
Licence P.037
1 Block 49/28
2 Licensee British Sun Oil Company
Limited
3 Field Thames
4 Percentage Interest in Licence 23.3333%
5 Unit Interest N/A
6 JOA 23.07.87
7 UOA N/A
8 Licence Operator ARCO British Limited
9 Unit Operator N/A
10 Pipeline System Thames Pipeline System
11 Pipeline Operator ARCO British Limited
12 Terminal Bacton
13 Terminal Operator Phillips Petroleum
Company Limited
<PAGE>
<PAGE> 104
Schedule 4
Part C(1)
---------
Licence P.037
1 Block 48/28a, 48/29,
2 Licensee British Sun Oil Company
Limited
3 Field Hewett/Della/Dawn
4 Percentage Interest in Licence 23.3333%
5 Unit Interest 10.68667%
6 JOA 20.05.65
7 UOA 01.04.69
8 Licence Operator ARCO British Limited
9 Unit Operator Phillips Petroleum
Company Ltd
10 Pipeline System Hewett Pipeline
11 Pipeline Operator Phillips Petroleum
Company Ltd.
12 Terminal Bacton
13 Terminal Operator Phillips Petroleum
Company Ltd.
<PAGE>
<PAGE> 105
Schedule 4
Part C(2)
---------
Licence P.112
1 Block 52/4a
2 Licensee British Sun Oil Company
Limited
3 Field Hewett
4 Percentage Interest in Licence 10.68667%
5 Unit Interest 10.68667%
6 JOA N/A
7 UOA 01.04.69
8 Licence Operator Phillips Petroleum
Company Ltd
9 Unit Operator Phillips Petroleum
Company Ltd.
10 Pipeline System Hewett Pipeline System
11 Pipeline Operator Phillips Petroleum
Company Ltd.
12 Terminal Bacton
13 Terminal Operator Phillips Petroleum
Company Ltd.
<PAGE>
<PAGE> 106
Schedule 4
Part D
------
Licence P.037
1 Block 48/11a
2 Licensee British Sun Oil Company
Limited
3 Field Pickerill
4 Percentage Interest in Licence 23.3333%
5 Unit Interest 9.3333%
6 JOA 20.05.65
7 UOA Effective Date: 30.11.89
8 Licence Operator ARCO British Limited
9 Unit Operator ARCO British Limited
10 Pipeline System Pickerill Pipeline System
11 Pipeline Operator ARCO British Limited
12 Terminal Theddlethorpe
13 Terminal Operator Conoco (UK) Limited
<PAGE>
<PAGE> 107
Schedule 4
Part E
------
Licence P.193
1 Block 211/7a, 211/12a
2 Licensee The Company
3 Field Magnus, South Magnus
4 Percentage Interest in Licence 5.00%
5 Unit Interest N/A
6 JOA 03.01.89
7 UOA N/A
8 Licence Operator BP Exploration Operating
Company Ltd
9 Unit Operator N/A
10 Pipeline System Ninian Pipeline System
11 Pipeline Operator BP Exploration Operating
Company Ltd.
12 Terminal Sullom Voe Terminal
13 Terminal Operator BP Exploration Operating
Company Ltd.
<PAGE>
<PAGE> 108
Schedule 4
Part F
------
Licence P.199
1 Block 3/8a
2 Licensee The Company
3 Field Ninian and Columba
Terraces
4 Percentage Interest in Licence 45.00%
5 Unit Interest 12.94% - Ninian
12.50% - Columba B
45.00% - Columba D
To be determined -
Columba E
6 JOA 12.05.94
7 UOA 25.01.79
8 Licence Operator Ranger Oil (U.K.) Ltd.
9 Unit Operator - Ninian - Chevron U.K.
Limited
- Columba B - Chevron
U.K. Limited
- Columba D - Ranger Oil
(U.K.) Ltd.
- Columba E - Not
Determined
10 Pipeline System Ninian Pipeline System
11 Pipeline Operator BP Exploration Operating
Company Ltd
12 Terminal Sullom Voe Terminal
13 Terminal Operator BP Exploration Operating
Company Ltd
<PAGE>
<PAGE> 109
Schedule 4
Part G
------
Licence P.470
1 Block 49/20b, 49/25b
2 Licensee British Sun Oil Company
Limited
3 Field N/A
4 Percentage Interest in Licence 15.00%
5 Unit Interest N/A
6 JOA 16.04.85
7 UOA N/A
8 Licence Operator Total
9 Unit Operator N/A
10 Pipeline System N/A
11 Pipeline Operator N/A
12 Terminal N/A
13 Terminal Operator N/A
<PAGE>
<PAGE> 110
Schedule 5
The Premises
Part 1
The Freehold Property
The freehold land and car park and buildings thereon (if any)
situated on the east side of Ruby Lane, Aberdeen and known as 2
and 3 Ruby Lane, Aberdeen and more particularly described in a
Disposition by Norwich Union Life Insurance Society to the
Company dated 6th March 1991 and recorded GRS (Aberdeen) 13th
May, 1991.
Part 2
The Leasehold Properties
<TABLE>
<CAPTION>
Nature of
Date of Lease Company's Term &
Premises and Parties Interest Current Rent
- -------- -------------- --------- ------------
<S> <C> <C> <C>
Ground Floor, 4th November 1994 Underlease (1) Rear Part: 8th June
Spencer House, (1) Caisse Nationale 1994 until 7th June
23 Sheen Road, de Credit Agricole 1999 at 81,500 pounds
Richmond-upon- (landlord) sterling per annum
Thames.
(2) Company (tenant) (2) Front Part: 19th
September 1994 until
7th June 1999 at 59,580
pounds sterling per
annum
Sun Oil House, 14th September 1979 Headlease 15th May 1978 for 125
20-25 Union Terrace, & (relates to years at an annual rent
Aberdeen. 26th September 1979 both equal to 23% of the
properties) income from time to
time arising under
those of the Under-
6-14 North Silver (1) The Grampian leases relating to this
Street, Aberdeen. Regional Council one of the Premises
(landlord)
(2) Company (tenant)
</TABLE>
<PAGE>
<PAGE> 111
Part 3 - The Underleases
<TABLE>
<CAPTION>
Date of
Underlease Term and
Part of Premises Sub-Tenant & Parties Current Rent
- ---------------- ---------- ---------- ------------
<S> <C> <C> <C>
6/8 North Silver The Urquhart 13th & 22nd 11th September 1995 until
Street, Aberdeen Partnership November 1995 31st August 1997 at 7,800
(Ground Floor) Limited (1) Company pounds sterling per annum
(2) The Urquhart
Partnership
Limited
20/25 Union Terrace, General Guarantee 4th & 18th July 18th May 1990 until
Aberdeen (Part Corporation 1990 17th May 2000 at
Ground and Part Limited (1) The Norwich 22,500 pounds sterling
Mezzanine Floors) Union Life Insur- per annum
ance Society
(2) General
Guarantee
Corporation
20/25 Union Terrace, Hill Samuel 17th December 23rd November 1987
Aberdeen (Part Investment 1987 & 15th until 22nd November
Ground and Part Services January 1988 2002 at 64,500 pounds
Mezzanine Floors) Limited (1) The Norwich sterling per annum
Union Life
Insurnance
Society
(2) Hill
Samuel
Investment
Services
Limited
20/25 Union Terrace, Bechtel 17th December 27th July 1993 until
Aberdeen (Part Limited 1993 & 5th 26th July 2003 at
Lower Ground, Part January 1994 154,566 pounds sterling
1st and Part 4th per annum
Floors) (1) Company
(2) Bechtel
Limited
20/25 Union Terrace, Snamprogetti 3rd & 17th 30th April 1993 until
Aberdeen (Part 2nd Limited November 1993 29th April 1998 at
Floor) (1) Company 37,300 pounds sterling per
annum
(2) Snampro-
getti Limited
20/25 Union Terrace, BAeSema Limited 4th and 7th 6th September 1993
Aberdeen (Part 3rd October 1993 until 6th September
Floor) (1) Company 2003 at 38,121 pounds
(2) BAeSema sterling per annum
Limited
</TABLE>
<PAGE>
<PAGE> 112
Schedule 6
Retention Bonuses of Employees
Gross Bonus
Entitlement (in
Name pounds sterling)
- ---- ----------------
Ballantyne, R.D. 192,525.00
Lewis, U. 115,533.33
Wright, W.B. 103,016.67
Lavery, J. 143,512.50
McAuley, P. 78,966.67
Milne G.M. 38,266.67
Ng J. 59,600.00
Sherwood, C.H. 92,933.33
Rae J. 104,150.00
Joss, A. 100,275.00
Cremin, T. 90,383.33
Grabiec, I. 86,525.00
Symes, P. 120,091.67
Lucas, M. 111,975.00
Willcocks, P.J. 96,958.33
Robbins, K.E. 49,450.00
+Employers N.I. Contribution (10.2%) 161,584.56
-------------
TOTAL 1,745,747.08
=============
<PAGE>
<PAGE> 113
Schedule 7
Form of Resignation Letter
To: The Directors
[ ] Limited
[ ]
I, [ ], resign my office as
[director/secretary] of [ ]
Limited (the "Company") and all other offices which I have with
the Company with effect from today's date and confirm that I have
no claims against the Company, its subsidiaries and holding
companies (as those terms are defined in the Companies Act 1985
section 736 (as amended)) or any of their or the Company's
respective officers and employees, whether in respect of loss of
office, unfair dismissal or (without limitation) on any other
account. However, to the extent that such a claim exists or may
exist, I irrevocably waive that claim and release those companies
and their respective officers and employees from all liability.
This disclaimer does not include any salary, fees or expenses
properly due to me.
IN WITNESS whereof this Deed has been executed the day
of 1996
EXECUTED as a DEED )
by )
in the presence of: )
<PAGE>
<PAGE> 114
Schedule 8
Deed of Tax Indemnity
DATED 1996
----------------------------------
SUN COMPANY, INC. (1)
and
AGIP (U.K.) LIMITED (2)
-----------------------------------
TAXATION DEED
in respect of the sale of
Sun Oil Britain Limited
-----------------------------------
Norton Rose
London
<PAGE>
<PAGE> 115
THIS DEED is made on 1996
BETWEEN:
(1) SUN COMPANY, INC. a company incorporated under the laws of
the Commonwealth of Pennsylvania and having its principal
place of business at Ten Penn Centre, 1801 Market Street,
Philadelphia, PA 19103-1699 ("Seller");
(2) AGIP (U.K.) LIMITED whose registered office is at AGIP
House, 10 Ebury Bridge Road, London SW1W 8PZ ("Purchaser").
WHEREAS this Deed is entered into pursuant to an agreement of
even date herewith between Seller and Purchaser for the sale and
purchase of the issued share capital of the Company ("the
Agreement").
IT IS HEREBY AGREED as follows:
1 Interpretation
--------------
1.1 Words and expressions defined in clause 1.1 of the Agreement
shall (unless the context otherwise requires) have the same
meaning for the purposes of this Deed.
1.2 In this Deed:
(a) "Claim" means any assessment, notice, demand or other
document issued or action taken by or on behalf of any
Taxation Authority or any form of self-assessment under
the Pay and File system introduced by the Finance Act
1990 from which it appears that any one or more of the
Company and the Subsidiaries is subject to, or is
sought to be made subject to, or might become subject
to, any Taxation Liability;
(b) "Company" means Sun Oil Britain Limited;
(c) "Event" means any event, occurrence, transaction, act
or omission (or any deemed event, occurrence,
transaction, act or omission) including for the
avoidance of doubt the sale and purchase of the shares
in the Company pursuant to the Agreement;
(d) "Relief" means any loss, relief, allowance, exemption,
set-off, deduction, credit or other relief relating to
any Taxation or to the computation of income, profits
or gains for the purposes of any Taxation including any
right to repayment of Taxation;
<PAGE>
<PAGE> 116
(e) "the Subject Company" means such one or more of the
Company and the Subsidiaries as shall be subject to a
Taxation Liability;
(f) "Subsidiaries" means Sun Oil North Sea Limited and
British Sun Oil Company Limited;
(g) "Taxation Liability" means a liability to make an
actual payment of or of an amount in respect of
Taxation whether or not such Taxation is also or
alternatively chargeable against or attributable to any
other person; and
(h) "unavailability" means, in relation to a Relief, the
reduction, modification, claw-back, counteraction,
disallowance or cancellation of or failure to obtain
that Relief, and "unavailable" shall be construed
accordingly.
1.3 The headings in this Deed are inserted for convenience only
and shall be ignored in construing this Deed. Unless the
context otherwise requires the singular shall include the
plural and vice versa.
2 Covenant by Seller
------------------
2.1 Subject to the provisions of clause 3 hereof, Seller hereby
covenants with Purchaser to pay to Purchaser an amount or
amounts equal to:
(a) any Taxation Liability of any one or more of the
Company and the Subsidiaries arising as a result of, in
respect of or by reference to:
(i) any Event occurring or deemed for the purposes of
any Taxation to occur on or before the Completion
Date; or
(ii) any income, profits or gains earned, accrued or
received or deemed for the purposes of any
Taxation to have been earned, accrued or received
on or before, or in respect of any period ending
on or before, the Completion Date;
<PAGE>
<PAGE> 117
(b) 22.5 per cent. of:
(i) in relation to SONSL, 30 per cent. of any decrease
as is finally determined to be made in SONSL's
qualifying expenditure (as at 1st July 1996) for
the purposes of section 25 CAA 1990, in respect of
its acquisition on 4th June, 1993 of the P344
interest in the Balmoral Field, where such
decrease results solely from an adjustment being
finally determined by a Taxation Authority to the
consideration apportioned in the agreement for its
acquisition;
(ii) in relation to the Company, 49 per cent. of any
decrease as is finally determined to be made in
the Company's qualifying expenditure (as at 1st
July 1996) for the purposes of section 25 CAA 1990
in respect of its acquisition on 22nd March, 1994
or the P199 interest in the Ninian Field, where
such decrease results solely from an adjustment
being finally determined by a Taxation Authority
to the consideration apportioned in the agreement
for its acquisition;
(c) any costs and expenses payable by Purchaser or any one
or more of the Company and the Subsidiaries in
connection with any such liability or amount as is
referred to in paragraph (a) or (b) above or with any
claim in respect thereof or in taking or defending any
action under clause 5 of this Deed.
2.2 Any payments made pursuant to clause 2.1 hereof shall, so
far as possible, be treated as an adjustment to the
consideration paid by Purchaser for the issued share capital
of the Company under the Agreement.
3 Limitations
-----------
3.1 The covenant contained in clause 2 shall not extend to any
Taxation Liability:
(a) to the extent that provision, reserve or allowance has
been made for such Taxation Liability in the Accounts;
(b) to the extent that such Taxation Liability has been
taken into account in determining the Net Working
Capital or is the subject of a payment pursuant to
clause 6 of the Agreement;
<PAGE>
<PAGE> 118
(c) for which the Company or the Subsidiaries is, or may
become, liable as a result of any Event in the ordinary
course of its business after the Economic Date (save
insofar as such Taxation Liability relates to the
Excluded Lease);
(d) to the extent that such Taxation Liability was paid or
discharged before the Economic Date;
(e) to the extent that such Taxation Liability arises or is
increased as a result of any provision or reserve in
the Accounts being insufficient by reason only of any
increase in the rate of Taxation made or any change in
Taxation legislation after the date of the Agreement;
(f) to the extent that such Taxation Liability arises or is
increased as the result of the withdrawal or change in
the terms of any administrative practice or Taxation
Authority concession coming into force after the date
of the Agreement which takes effect retrospectively or
as a result of any judicial decision after the date of
the Agreement on any point being inconsistent with the
basis on which the Company or the Subsidiary in
question has previously prepared and filed computations
and returns;
(g) to the extent that such Taxation Liability arises or is
increased as the result of any act or omission effected
by the Company, the Subsidiaries or Purchaser after
Completion otherwise than pursuant to a legally binding
commitment created on or before Completion and
otherwise than in the ordinary course of business;
(h) to the extent that such Taxation Liability arises as a
result of any change on or after Completion in any
accounting policy or practice, or any Taxation
reporting or computation practice (including the basis
of preparation and method of submission of any Taxation
returns), of the Company or the Subsidiaries;
(i) to the extent that such Taxation Liability arises as a
result of Purchaser, the Company or the Subsidiaries
failing to submit the returns and computations required
to be made by them or not submitting such returns and
computations within the appropriate time limits or
submitting such returns and computations otherwise than
on a proper basis, in each case after Completion;
<PAGE>
<PAGE> 119
(j) to the extent that such Taxation Liability would not
have arisen but for Purchaser, an Affiliate of
Purchaser, or the Company or the Subsidiaries
disclaiming any part of the benefit of capital or other
allowances against Taxation claimed on or before the
date hereof or proposed to be claimed (information in
relation to such proposed claims having been provided
to Purchaser in writing under the terms of the
Disclosure Letter, and the amounts the subject of the
same to be notified in writing to Purchaser), or
omitting to make or revising or withdrawing any such
claim or any election or surrender or doing (or
omitting to do) any other thing in circumstances where
the same affects the treatment of any relief against
Taxation taken into account in the Accounts or in
determining the Net Working Capital or claimed on or
before the date hereof or proposed to be claimed
(provided that information in relation to such proposed
claims has been provided to Purchaser in writing on or
prior to Completion, and the amounts the subject of the
same are notified in writing to Purchaser);
(k) to the extent that such Taxation Liability arises under
Part XV of the Value Added Tax Regulations 1995 by
reason of any Event or change in circumstances
occurring after Completion;
(l) to the extent that such Taxation Liability arises or is
increased as a consequence of any failure by Purchaser,
the Company or any Subsidiary to comply with any of
their obligations under this Deed or the Agreement;
(m) to the extent that the amount for which Seller is
liable under this Deed does not exceed an amount for
which Seller is liable under the Agreement in respect
of the same matter, and such liability has been fully
satisfied;
(n) to the extent that the Company or any associated
company of the Company has received an amount in
respect of such Taxation Liability from any Third Party
(as defined in clause 4 of the Deed);
(o) to the extent that such Taxation Liability is stamp
duty or stamp duty reserve tax imposed as a result of
or in consequence of the purchase of the Sale Shares;
<PAGE>
<PAGE> 120
(p) to the extent that a payment has been made in respect
of such Taxation Liability pursuant to clause 6 of the
Agreement; and
(q) to the extent that Seller or such other person as is
referred to in clause 9.1(a) hereof has satisfied such
Taxation Liability by reason of being liable for such
Taxation under section 767A ICTA 1988.
3.2 The provisions of clauses 6.16, 7.9 and 7.12 of the
Agreement shall operate so as to restrict the liability of
Seller hereunder.
4 Rebate
------
4.1 Purchaser undertakes that if, where Seller has paid or is
required to pay any amount due hereunder in respect of any
Taxation Liability, Purchaser or the Subject Company is or
becomes entitled to receive or receives from any person
other than the Company or any of the Subsidiaries ("the
Third Party") a payment, credit or benefit in respect of
such Taxation Liability, Seller shall remain liable to make
a payment to Purchaser hereunder (except to the extent that
such payment, credit or benefit has been received by
Purchaser or the Subject Company prior to the due date for
such payment by Seller), and shall make such payment in
accordance with Clause 7, but Purchaser shall notify Seller
of such entitlement or recovery as soon as reasonably
practicable and, where recovery has not been effected at the
date of notification, shall (if requested by and at the
expense of Seller and upon Seller indemnifying the Company
or Purchaser to its reasonable satisfaction against all
costs or expenses which may be thereby incurred) take, or
cause the Subject Company to take, such action as Seller
shall reasonably request to enforce such recovery against
the person in question (keeping Seller fully informed of the
progress of any action taken) and Purchaser shall repay to
Seller a sum equal to the lesser of:
(a) the amount of any payment so received or the amount
that Purchaser or the Subject Company will save by
virtue of the credit or benefit ("the Benefit"), after
deduction therefrom of an amount equal to any costs
incurred in obtaining it and any Taxation Liability in
respect of it; and
(b) the aggregate amount paid by Seller hereunder in
respect of the Taxation Liability in question.
<PAGE>
<PAGE> 121
Any amount of the Benefit not so paid to Seller shall be
carried forward and set off against any amount payable in
respect of any claims hereunder.
4.2 Any payment required to be made by Purchaser and the Subject
Company pursuant to clause 4.1 shall be made:
(a) in a case where Purchaser or the Subject Company
receives a payment or a credit or benefit other than in
the form of a Relief, within 5 business days of the
receipt thereof; and
(b) in a case where Purchaser or the Subject Company
receives a credit or benefit in the form of a Relief,
on or before the date on which Taxation would have been
recoverable by the appropriate Taxation Authority but
for the use of such Relief.
4.3 Purchaser shall ensure that any such Relief as is referred
to in clause 4.2(b) is used in priority to any other Relief,
and in the absence of evidence to the contrary it shall be
deemed to be so used. Seller shall be entitled to require
(at the expense of Seller) that the Subject Company's
auditors shall certify the amount and date of use of such
Relief for the purposes of this clause 4.
4.4 Any sum not paid by Purchaser or the Subject Company on the
due date of payment specified in clause 4.2 shall bear
interest (which shall accrue from day to day after as well
as before any judgment for the same) at the Agreed Rate from
the due date to and including the day of actual payment of
such sum. Such interest shall be paid on the demand of
Seller.
5 Conduct of Claims
-----------------
5.1 If Purchaser shall become aware of any Claim which is likely
to give rise to a liability on Seller hereunder, Purchaser
shall give notice thereof or ensure that notice thereof is
given as soon as reasonably practicable to Seller in
accordance with clause 9.
5.2 As regards any Claim, Purchaser shall take or shall ensure
that the Subject Company shall take such action as Seller
may by written notice given to Purchaser reasonably request
to cause the Claim to be withdrawn or to dispute, resist,
appeal against, compromise or defend the Claim and any
<PAGE>
<PAGE> 122
determination in respect thereof or to apply to postpone (so
far as legally possible) the payment of any tax pending the
determination of any appeal but subject to Purchaser and the
Subject Company being indemnified to their reasonable
satisfaction by Seller against all losses (including any
additional Taxation Liability), interest, costs, damages and
expenses which may be thereby incurred by Purchaser or the
Subject Company, and Provided that:
(a) any request made by Seller pursuant to this clause 5.2
shall be made within a reasonable time of receipt by
Seller of any notice given by Purchaser to Seller in
accordance with clause 5.1;
(b) Purchaser and the Subject Company shall not be obliged
to comply with any request of Seller which involves
contesting any assessment for Taxation before any court
or any other appellate body unless they have been
advised in writing by leading tax counsel instructed by
agreement between Purchaser and Seller at the expense
of Seller that it is worth proceeding with an appeal
against the assessment for Taxation.
6 Over-provision and Corresponding Savings
----------------------------------------
6.1 If:
(a) any provision for Taxation in the Accounts or the Net
Working Capital Statement has proved to be an over-
provision (as certified, if Seller so requests by the
auditors for the time being of the Subject Company at
the expense of Seller), except to the extent that such
over-provision results from:
(i) the utilisation of a Relief which has been
treated as an asset of the Subject Company in
preparing the Accounts or the Net Working
Capital Statement; or
(ii) a Relief which arises as a consequence of, or by
reference to an Event occurring (or deemed to
occur) after Completion; or
(iii) from a change in rates of Taxation appropriate
to the particular over-provision made after the
date of this Agreement; or
<PAGE>
<PAGE> 123
(b) any Taxation Liability to which clause 2 applies gives
rise to a Relief which would not otherwise have arisen
or which arises in an accounting period other than the
one in which the Taxation Liability arises or which
gives rise to a reduction in the amount of, or the
elimination of, a Taxation Liability of the Subject
Company whenever arising,
an amount equal to such over-provision or (as the case may
be) the amount of the Taxation Liability which is eliminated
or the amount by which it is reduced (except to the extent
to which it has been taken into account or credit has been
given for it in relation to any claim in relation to any
breach of Warranty (as determined and certified by the
auditors for the time being of the Subject Company at the
expense of Seller)) shall be dealt with in accordance with
clause 6.2 below.
6.2 Where pursuant to clause 6.1 any amount (the "Relevant
Amount") is to be dealt with in accordance with this sub-
clause:
(a) the Relevant Amount shall first be set off against any
payment then due from Seller under this Deed;
(b) to the extent that there is an excess, a refund shall
be made to Seller of any previous payment or payments
made by it under this Deed and not previously refunded
under this sub-clause up to the amount of such excess;
and
(c) to the extent that the excess referred to in sub-clause
(b) is not exhausted under that sub-clause, the
remainder of that excess shall be carried forward and
set off against any future payments which may become
due from Seller under this Deed.
6.3 For the purposes of clause 6.1(b), a Taxation Liability
shall not be treated as being eliminated or reduced until
the date upon which such liability is actually eliminated or
reduced and, in particular (but without prejudice to the
generality of the foregoing), where the Relief is the right
to set a liability of the Subject Company to advance
corporation tax against a liability of the Subject Company
to corporation tax pursuant to Section 239(1) or (4) ICTA
1988 or gives rise to a repayment of corporation tax
pursuant to Section 239(3) ICTA 1988, the Relief shall not
be treated as having arisen until the offset has occurred or
the repayment has been received.
<PAGE>
<PAGE> 124
7 Payment
-------
7.1 Where any amount is required to be paid by Seller under this
Deed pursuant to clause 2.1(a) hereof, Seller shall pay such
amount free and clear of all withholding for or on account
of Taxation, save only where such withholding is required by
law in cleared, immediately available funds on or before the
date two business days before the date on which the Taxation
in question is due for payment to the relevant Taxation
Authority or, if later, five business days following the
date on which Purchaser notifies Seller of its liability to
make such payment.
7.2 If Seller becomes liable to make a payment under clause 2(a)
or (b) above in respect of any amount not being a Taxation
Liability, Purchaser will notify Seller in writing of the
amount which Seller is required to pay and Seller shall pay
such amount in cleared, immediately available funds on or
before the date 14 business days after the date on which it
receives such notice. Any dispute as to the amount
contained in such notice shall be determined (at the cost of
Seller) by the auditors to the Subject Company, acting as
experts and not arbitrators.
7.3 Sums not paid by Seller on the dates specified in clause 7.1
and 7.2 above shall bear interest (which shall accrue from
day to day after, as well as before, judgment at the Agreed
Rate from the date following the said specified date up to
and including the day of actual payment of such sums (or the
next business day if such day of actual payment is not a
business day) compounded quarterly.
7.4 If at any time any applicable law, regulation or regulatory
requirement, requires Seller to make any deduction or
withholding from any payment made in respect of any amount
due from Seller hereunder, the amount so due shall be
increased to the extent necessary to ensure that, after the
making of such deduction or withholding, Purchaser receives,
on the due date for such payment, a net sum equal to the sum
which it would have received had no such deduction or
withholding been required to be made, provided this clause
7.4 shall only apply if:
(a) Purchaser is a resident of the United Kingdom (as that
term is defined in Article 4 of the Double Tax
Convention between the United Kingdom and the United
States of 31st December 1975); and
<PAGE>
<PAGE> 125
(b) has had made and had accepted any relevant applications
for relief under such Convention.
7.5 If Seller is required by law to make any deduction or
withholding as referred to in clause 7.4 above, Seller
shall:
(a) make such deduction or withholding;
(b) pay the full amount deducted or withheld to the
relevant authority in accordance with applicable law;
and
(c) forthwith furnish to Purchaser the original, or a
certified copy, of a receipt evidencing payment
thereof.
7.6 If, following any such deduction or withholding from any
payment by Seller as is referred to in clause 7.4, Purchaser
shall receive or be granted a credit against or remission
for any Taxation payable by it, Purchaser shall, subject to
Seller having made any increased payment in accordance with
clause 7.4 and to the extent that Purchaser can do so
without prejudicing the retention of the amount of such
credit and without prejudice to the right of Purchaser to
obtain any other Relief which may be available to it,
reimburse Seller with such amount as Purchaser shall (acting
in good faith) certify to be such portion of such credit as
will leave Purchaser (after such reimbursement) in no worse
a position than it would have been had there been no such
deduction or withholding from the payment by Seller as
aforesaid. Such reimbursement shall be made forthwith upon
Purchaser certifying that the amount of such credit has been
received by it.
8 Purchaser's Covenant
--------------------
8.1 Purchaser hereby covenants with Seller to pay to Seller, an
amount equivalent to:
(a) any Taxation for which Seller, or any other person
falling within section 767A(2) ICTA 1988 by virtue of a
relationship which he has with Seller, becomes liable
by virtue of the operation of section 767A and 767B
ICTA in circumstances where the taxpayer company (as
referred to in section 767A(1) ICTA 1988) is the
Company or a Subsidiary;
<PAGE>
<PAGE> 126
(b) any other Taxation for which Seller becomes liable as a
result of the failure by the Company or a Subsidiary to
discharge it; and
(c) 22.5 per cent. of:
(i) in relation to SONSL, 30 per cent. of any
increase as is finally determined to be made in
SONSL's qualifying expenditure (as at 1st July
1996) for the purposes of section 25 CAA 1990,
in respect of its acquisition on 4th June, 1993
or the P344 interest in the Balmoral Field,
where such increase results solely from an
adjustment being finally determined by a
Taxation Authority to the consideration
apportioned in the agreement for its
acquisition;
(ii) in relation to the Company, 49 per cent. of any
increase as is finally determined is required to
be made the Company's qualifying expenditure (as
at 1st July 1996 immediately after the Economic
Date) for the purposes of section 25 CAA 1990 in
respect of its acquisition on 22nd March, 1994
or the P199 interest in the Ninian Field, where
such increase results solely from an adjustment
being finally determined by any Taxation
Authority to the consideration apportioned in
the agreement for its acquisition;
8.2 The covenant contained in clause 8.1 above shall:
(a) extend to any reasonable costs incurred by Seller or
such other person in connection with such Taxation or a
claim under this clause 8;
(b) not apply to any Taxation to the extent that Purchaser
could claim payment in respect of it under clause 2.1
of this Deed; and
(c) not apply to Taxation which has been recovered under
section 767B(2) ICTA 1988 (and Seller shall ensure that
no such recovery is sought to the extent that payment
is made hereunder).
<PAGE>
<PAGE> 127
8.3 Clauses 2.2 (treatment of the payment as an adjustment to
the purchase price), 5 (Conduct of Claims), 7 (Payments)
shall apply to the covenant contained in this clause 8 as it
applies to the covenant contained in clause 2.1, replacing
references to Seller with references to Purchaser (and vice
versa) and making any other necessary modifications.
9 Notices
-------
The provisions of clause 9 of the Agreement shall apply in
relation to any notice required to be given or received
under this Deed.
10 Assignment
----------
The provisions of clause 12 of the Agreement shall apply in
relation to this Deed.
11 Governing law
-------------
The provisions of clause 14 of the Agreement shall apply in
relation to this Deed.
12 Counterparts
------------
12.1 This Deed may be executed in any number of counterparts, and
by the parties on separate counterparts, but in that case
shall not be effective until each party has executed at
least one counterpart.
12.2 Each counterpart shall constitute the original of this Deed,
but all the counterparts shall together constitute one and
the same instrument.
IN WITNESS whereof this Deed has been entered into the day and
year first above written.
<PAGE>
<PAGE> 128
EXECUTED and DELIVERED )
as a DEED by )
SUN COMPANY, INC. )
.....................................
Director
.....................................
Corporate Secretary
EXECUTED and DELIVERED )
as a DEED by )
AGIP (U.K.) LIMITED )
.....................................
Director
.....................................
Director/Secretary
<PAGE>
<PAGE> 129
Schedule 9
Preliminary Net Working Capital Statement
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance Sheet Preliminary
as at Net
Assets 30 June 96 Working Capital
- ------ ------------- ---------------
<S> <C> <C>
Current Assets
Cash 2,847.7 2,847.7
OBO Advances 6,469.1 6,469.1
Gas Receivables 6,067.6 6,067.6
Tariff Receivables 3,566.2 3,566.2
Other Receivables 1,713.1 1,713.1
Crude Receivables 16,734.3 16,734.3
Crude Over/Under Lifts 4,025.6 4,025.6
Adjusted Inter-company
Receivable 46,238.4 46,238.4
Plant, Property & Equipment
Oil and Gas 207,251.4
FPV 42,667.2
Union Terrace 7,157.2
Furniture and Equipment 1,410.8
Other Assets 1,447.2
---------
Total Assets 347,595.8
---------
Liabilities & Equity
- --------------------
Current Liabilities
Accrued Liabilities 4,366.3 (6,154.3)*
Trade Payables 10,924.3 (10,924.3)
C.T. Payable 10,613.1 (10,613.1)
Royalty Payable 8,223.5 (8,223.5)
PRT Payable 14,928.2 (14,928.2)
Decommissioning 59,691.3
Deferred Taxes 17,624.6
Other Deferred 1,167.7
Inter-company Debt 64,500.0 (64,500.0)
Restructuring Reserve 23,878.1
Deferred Income 13,286.5 (3,420.0)
Equity 118,392.2
--------- ---------
Total Liabilities & Equity 347,595.8 NET(31,101.4)
--------- ---------
</TABLE>
*Includes $1,787,973 for retention bonuses referred to in clause
6.8.
<PAGE>
<PAGE> 130
Schedule 10
Guarantees and Counter-Indemnities
<TABLE>
<CAPTION>
Guaranteed
Guarantor Beneficiary Obligations
- --------- ----------- ------------
<C> <S> <S>
1 Seller Bank of Nova Scotia SOBL's Ninian abandonment
obligations (1996)
2 Seller LASMO plc SOBL's obligations under
OPS Trust Deed
3 Seller British Gas Trading SOBL's obligations under
Limited Thames Field Principal
Agreement
4 Seller British Gas Trading SOBL's obligations under
Limited Hewett Field Principal
Agreement
5 Seller British Gas Trading SOBL's obligations under
Limited North of Hewett Field
Principal Agreement
</TABLE>
<PAGE>
<PAGE> 131
Schedule 11
Allocation of Purchase Price Pursuant to clause 6.9(a)
1 Seller and Purchaser agree that following Completion, Seller
shall prepare an allocation of the Consideration for the
Sale Shares between the following assets of Sun Oil Britain
Limited:
(a) Cash, Demand Deposit and Like Accounts in Banks,
Savings Institutions, etc.
(b) Trade Notes and Accounts Crude Oil Inventories, Natural
Gas Inventories, Natural Gas Liquids Inventories;
(c) General & Administrative Assets, such as Office
Materials & Supplies, Office Furniture, Fixtures &
Equipment, Prepaid Expenses, Favourable Office
Leasehold Interests, Autos
(d) In relation to the Balmoral, Glamis & Stirling, Magnus,
Satellites, Ninian, Columba B, D&E, Hewett, Della,
Dawn, Thames A Complex and Pickerill Fields, the Oil &
Gas Reserves, the Balmoral FPV, Well & Other Equipment
Used in the Extraction of Crude Oil & Natural Gas from
Oil and/or Gas Wells, Materials & Supplies Used in the
Extraction of Crude Oil, Natural Gas & Natural Gas
Liquids, Compression & Pumping Equipment, Gathering and
Transmission Pipelines, Storage and Transshipment
Facilities, Terminals, and Other Equipment and
Facilities Used in the Processing, Transportation &
Distributing of Crude Oil, Natural Gas & Natural Gas
Liquids, the Materials & Supplies Used in the
Processing, Transporting or Distributing of Crude Oil,
Natural Gas & Natural Gas Liquids, and Blocks 49/20 and
49/25b, License Interest
(e) Goodwill & Going Concern Value
(f) Shareholding in SONSL
(g) Shareholding in BSOC
2 Following the preparation of such allocation, Seller shall
send the same to Purchaser at least 45 days prior to the due
date for submission of such allocation to the US Internal
Revenue Service and shall take account of any reasonable
comments made by Purchaser or its agents where such comments
are received by Seller within 30 days of receipt by
Purchaser of such proposed allocation.
<PAGE>
<PAGE> 132
Schedule 12
United States Federal, State and Local Taxes
1 (a) In this Schedule,
"Code" means the United States Internal Revenue Code of
1986, as amended;
"Tax" or "Taxes" means any tax or taxes, similar
charge, fees, impost, tariff, levy or other assessment
(including, without limitation, income taxes, severance
taxes, excise taxes or fees, transfer gain taxes, sales
and use taxes, ad valorem taxes, withholding taxes,
payroll taxes or other taxes of or with respect to
gross receipts, premiums, real property, personal
property, windfall profits, transfers, licensing,
employment, franchise or minimum taxes), together with
any related liabilities, penalties, fines, additions to
tax or interest imposed by the United States or any
state, county or local government, or sub-division or
agency thereof;
"Tax Returns" or "Returns" means all reports, estimates
and information statements relating to, or required to
be filed in connection with, any Taxes pursuant to the
statutes, rules and regulations of any United States,
federal, state or local government Taxation Authority.
(b) References in this Schedule to "interest imposed" shall
also include interest allowed, assessed, credited,
abated, paid, received, charged, realised, benefit
(deemed or actual) or otherwise indicating an economic
cost or economic benefit impact.
2 Seller and Purchaser agree to the following indemnification
provisions regarding United States federal, state and local
taxes:
(a) From and after the Economic Date, Seller shall
indemnify and save Purchaser and the Group harmless
from, and Seller shall be entitled to any refund of,
any and all Taxes (including, without limitation, any
obligation to contribute to the payment of, or right to
share in the refund of, a Tax determined on a
consolidated, combined or unitary basis with respect to
a group of corporations that includes or included the
Group) which are:
<PAGE>
<PAGE> 133
(i) imposed on Seller or any other member of any
consolidated, combined or unitary group that
includes or which at any time included the Group
or Seller (hereinafter "Seller's Group") (other
than the Group) for any taxable year; and
(ii) imposed on the Group in respect of its income,
business, property or operations or for which the
Group may otherwise be liable, for any taxable
year that ends on or before the Economic Date and,
with respect to any taxable year beginning before
and ending after the Economic Date, the portion of
such taxable year ending on (and including) the
Economic Date (hereinafter, the "Short Period")
(the Short Period and any taxable year that ends
on or before the Economic Date being collectively
hereinafter, the "Seller's Period") including, but
not limited to any Taxes imposed on the Group,
Seller, or Seller's Group as a result of Seller
and Purchaser making the Elections (as defined in
clause 6.8 of the Agreement); provided, however,
Seller will not be responsible for Taxes resulting
from any express or deemed election under Section
338 of the Code (or comparable provisions of state
law) where Purchaser has failed to make a valid
election under Section 338(h)(10) of the Code (or
comparable provisions of state law) as provided
for in clause 6.8.
(b) Purchaser and the Group shall indemnify and save Seller
and members of the Seller's Group harmless from, and
shall be entitled to any refund of, any and all Taxes
imposed on the Group (or any successor thereto) in
respect of its income, business, property or operations
for any taxable year that begins after the Economic
Date and, with respect to any taxable year beginning
before and ending after the Economic Date, the portion
of such taxable year commencing on the day following
the Economic Date (hereinafter, the "Purchaser's
Period").
(c) The amount of any indemnity payment required to be made
by an indemnifying party pursuant to this paragraph 2
shall be determined after giving effect to the present
value (based on a discount rate equal to the short-term
applicable federal rate as determined under Section
1274(d) of the Code at that time) of any tax benefit
realised or realisable by the indemnified party in
<PAGE>
<PAGE> 134
connection with or as a result of the incurrence of the
tax liability for which the indemnity payment is to be
made. In the event of a refund or credit with respect
to a Tax for which an indemnity payment has been made
pursuant to this paragraph 2, the indemnified party
shall promptly pay, not later than five business days
after receipt, to the indemnifying party the amount of
such refund (plus any interest received with respect to
such refund) or shall promptly pay to the indemnifying
party the amount of such credit (plus any interest the
crediting party would have received have it claimed a
refund in lieu of a credit) at the time such credit
reduces the tax liability of the indemnified party. To
the extent any such refund or credit (and related
interest) is properly includible in the taxable income
of the recipient, the amount forwarded or reimbursed to
Seller or Purchaser shall be reduced by the tax
liability incurred with respect to such receipt. Any
refunds or reimbursements not made within the time
periods specified above shall bear interest at the
underpayment rate or under Section 6621(a)(2) of the
Code in effect for the period of the non-payment.
(d) For the purposes of this Agreement, the portion of each
such tax that is attributable to the operations of the
Group for such Short Period shall be (i) in the case of
a Tax that is not based on gross or net income, the
total amount of such Tax for the taxable year in
question multiplied by a fraction, the numerator of
which is the number of days in the Short Period, and
denominator of which is the total number of days in
such taxable year, and (ii) in the case of a Tax that
is based on gross or net income, the Tax that would be
due with respect to the Short Period if such Short
Period were a short taxable year, based upon the
Audited Accounts for the Short Period.
(e) (i) The party to be indemnified shall give the
indemnifying party notice when any payment in
connection with the Tax indemnification is due.
The indemnifying party shall pay to the party to
be indemnified, within five days of receiving
notice, but in no event more than two days prior
to the date any tax payment is due by the party to
be indemnified to a Taxation Authority (or, if no
payment is due by the party to be indemnified to a
Taxation Authority, on the date the Taxation
Authority accepts a tax overassessment or consents
to an assessment) an amount equal to the Tax due
from the indemnifying party.
<PAGE>
<PAGE> 135
(ii) The indemnifying party shall pay an amount equal
to the Tax benefit due to the party to be
indemnified within five days of the occurrence of
the earliest of:
(A) the receipt of a tax benefit from a Taxation
Authority;
(B) if the benefit is applied to other
liabilities due by the indemnifying party,
the dates the Taxation Authority accepts such
benefit or overassessment; and
(C) if there is a Tax payment due from the
indemnifying party to the Taxation Authority,
but a benefit is allowable to the party to be
indemnified under the Agreement, the date the
Tax payment is due by the indemnifying party
to the Taxation Authority.
3 Returns:
(a) Seller shall prepare and file all federal and state Tax
Returns required of the Group with respect to any
taxable year (including any short taxable year) ending
on or before the Economic Date that have not been filed
prior to the Completion Date. Purchaser and the Group
shall prepare and file all Tax Returns of the Group
with respect to any taxable year ending after the
Completion Date. Within sixty days after Completion
Date, Purchaser shall provide Seller with sufficient
federal tax accounting data and information to support
a determination of the federal income tax liability of
the Group for the Seller's Period, as well as
sufficient data and information to allow Seller to
prepare the state Tax Returns. For purposes of
allocating the items of income, gain, deductions and
loss of the Company to the period ending on the
Completion Date for purposes of Treasury Regulations
Section 1.1502-76(b), such allocation shall be based
upon an interim closing of the books of the Company.
(b) After the Completion Date, Seller will be entitled to
file amended Tax Returns for the Group for the Seller's
Period, to control the audit of any such original or
amended returns for the Seller's Period, including but
not limited to extending the applicable statute of
limitations, and settling of litigated claims, and
Purchaser will co-operate and cause the Group to
execute such powers of attorney and other documents as
are necessary to carry out this intent.
<PAGE>
<PAGE> 136
(c) Seller shall prepare and timely file, or cause to be
prepared and timely filed, all Tax Returns described in
paragraphs 3(a) and (b) above and shall pay any Taxes
shown thereon to be due. Such Tax Returns that
included the periods up to completion shall be prepared
on a basis consistent with the basis upon which
comparable Tax Returns were prepared for prior periods.
4 Co-operation
(a) Purchaser and Seller shall furnish or cause to be
furnished to each other, upon request, as promptly as
practicable, such information (including access to
books and other records) and assistance as is
reasonably necessary for the filing of any Tax Return,
for the preparation for or conduct of any audit, and
for the prosecution or defence of any claim, suit or
proceeding relating to any proposed tax adjustment.
Purchaser and Seller shall co-operate with each other
in the conduct of any audit or other similar
proceedings and each shall execute and deliver such
powers of attorney and other documents as are necessary
to carry out this intent.
(b) If, in the course of the any member of the Group being
audited by any Taxation Authority, either Seller or
Purchaser requests from the other information, records
or documentation normally maintained to support the
determination of Tax liabilities, and required to be
maintained under the record retention provisions
required by law, regulations, procedure or revenue
ruling, and such item of documentation was not
maintained in accordance with the record retention
provisions described herein and, therefore, cannot be
produced or is unavailable, and the lack of such
documentation, information or record results in an
adverse audit finding against the requesting party on
the Tax issue to which such document relates by the
Taxation Authority conducting the audit, then the party
failing to supply the requested item of information
shall indemnify the requesting party for additional
Taxes, interest and penalty relating to the
undocumented tax issue on the same basis as provided in
paragraph 2 above.
<PAGE>
<PAGE> 137
5 Contests
Purchaser and Seller shall each promptly give written notice
to the other of any examination, audit, inquiry or proposed
or actual assessment by a federal, state or local covering
any potential liability for Taxes where a right may exist of
one party to demand payment for such Tax from, or be
indemnified by, the other party. Whenever any Taxation
Authority informs Purchaser or the Group of a claim,
assessment or other dispute concerning an amount of Taxes
for which Seller is or may be liable under this Agreement,
Purchaser shall promptly inform Seller in writing, and
Seller shall have the right to control any resulting
proceedings and to determine whether and when to settle any
such claim, assessment or dispute to the extent such
proceedings or determinations affect the amount of Taxes for
which Seller is liable under this Schedule; provided,
however, that Purchaser and the Group are not hereby
relieved of their responsibilities to handle an audit unless
expressly assumed by Seller. Whenever any Taxation
Authority informs Seller of a claim, assessment, or other
dispute concerning an amount of Taxes for which Purchaser is
or may be liable under this Agreement, Seller shall promptly
inform Purchaser in writing, and Purchaser shall have the
right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment or
dispute to the extent such proceedings or determinations
affect the amount of Taxes for which Purchaser is liable
under this Agreement. Each party hereto agrees to give the
other party the right of reasonable consultation regarding
the matters subject to this paragraph which could affect the
other. The omission to notify the indemnifying party shall
not believe it from liability which it may have to the
indemnified party to the extent the indemnifying party is
not prejudiced by such omission.
6 Termination of Tax Allocation Agreement
Effective as of the Economic Date, all liabilities and
obligations between Seller and the Group under any tax
allocation agreement or other similar arrangement in effect
prior to the Economic Date shall be extinguished in full,
and any liabilities or rights existing under any such
agreement or arrangement shall terminate and shall no longer
be enforceable.
<PAGE>
<PAGE> 138
7 Time Limitation
The agreements in this Schedule shall remain in effect for a
period of one year past any statute of limitations governing
the duration of either party's rights or liabilities in any
particular instance. Seller shall notify Purchaser at least
60 days prior to the expiry of the statute of limitations
and notify Purchaser within 30 days of any extension of the
statute of limitations.
<PAGE>
<PAGE> 139
SIGNED by V. R. Harlow )
for and on behalf of )
SUN COMPANY, INC. in the ) s/ V.R. HARLOW
presence of:- ) -------------------------------
Duly Appointed Attorney-in-Fact
SIGNED by E. Sganzerla )
for and on behalf of )
AGIP (U.K.) LIMITED in the ) s/ E. SGANZERLA
presence of:- ) -------------------------------
Director
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(In Millions Except Per Share Amounts)
- -------------------------------------------------------------------------
For the Six Months
Ended June 30
--------------------
1996 1995
------- -------
(UNAUDITED)
<S> <C> <C>
Loss from continuing operations before cumulative
effect of change in accounting principle (1) $(46.0) $(79.0)
Less: Dividends on preference stock (22.5) --
------ ------
Loss from continuing operations before cumulative
effect of change in accounting principle
attributable to common stock (2) (68.5) (79.0)
Income from discontinued operations (3)(a) 38.0 210.0
Cumulative effect of change in
accounting principle (4)(b) -- (87.2)
------ ------
Net income (loss) attributable to
common stock (5) $(30.5) $ 43.8
====== ======
Weighted average number of shares of common stock
and common stock equivalents outstanding (6) 74.0 107.1
==== =====
Income (loss) per share of common stock:
Loss from continuing operations before
cumulative effect of change in accounting
principle (2)/(6) $(.92) $(.74)
Income from discontinued operations (3)/(6) .51 1.96
Cumulative effect of change in
accounting principle (4)/(6) -- (.81)
----- -----
Net income (loss) (5)/(6) $(.41) $ .41
===== =====
Weighted average number of shares of common
stock and common stock equivalents out-
standing on a fully diluted basis (7) 74.0 107.1
==== =====
Income (loss) per share of common stock
on a fully diluted basis (c):
Loss from continuing operations before
cumulative effect of change in
accounting principle (2)/(7) $(.92) $(.74)
Income from discontinued operations (3)/(7) .51 1.96
Cumulative effect of change in
accounting principle (4)/(7) -- (.81)
----- -----
Net income (loss) (5)/(7) $(.41) $ .41
===== =====
</TABLE>
- --------------
(a) Reflects income from discontinued international oil and gas production
operations and Canadian conventional and synthetic oil and gas
exploration and production operations. (See Note 2 to the condensed
consolidated financial statements.)
(b) Reflects the cumulative effect of a change in the method of accounting
for impairment of long-lived assets. (See Note 5 to the condensed
consolidated financial statements.)
(c) Fully diluted earnings per share generally are determined by dividing
earnings by the weighted average number of shares outstanding, assuming
redemption of the preference shares for common stock. However,
redemption was not assumed in 1996 since it would have resulted in a
smaller loss per share.
<PAGE>
<PAGE> 2
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(In Millions Except Per Share Amounts)
- -------------------------------------------------------------------------
For the Three Months
Ended June 30
--------------------
1996 1995
------- -------
(UNAUDITED)
<S> <C> <C>
Loss from continuing operations (1) $(22.0) $(43.0)
Less: Dividends on preference stock (11.2) --
------ ------
Loss from continuing operations
attributable to common stock (2) (33.2) (43.0)
Income from discontinued operations (3)(a) 19.0 181.0
------ ------
Net income (loss) attributable to common stock (4) $(14.2) $138.0
====== ======
Weighted average number of shares of common stock
and common stock equivalents outstanding (5) 74.0 107.2
==== =====
Income (loss) per share of common stock:
Loss from continuing operations (2)/(5) $(.45) $(.40)
Income from discontinued operations (3)/(5) .26 1.69
----- -----
Net income (loss) (4)/(5) $(.19) $1.29
===== =====
Weighted average number of shares of common
stock and common stock equivalents out-
standing on a fully diluted basis (6) 74.1 107.2
==== =====
Income (loss) per share of common stock
on a fully diluted basis (b):
Loss from continuing operations (2)/(6) $(.45) $(.40)
Income from discontinued operations (3)/(6) .26 1.69
----- -----
Net income (loss) (4)/(6) $(.19) $1.29
===== =====
</TABLE>
- ----------------
(a) Reflects income from discontinued international oil and gas production
operations and Canadian conventional and synthetic oil and gas
exploration and production operations. (See Note 2 to the condensed
consolidated financial statements.)
(b) Fully diluted earnings per share generally are determined by dividing
earnings by the weighted average number of shares outstanding, assuming
redemption of the preference shares for common stock. However,
redemption was not assumed in 1996 since it would have resulted in a
smaller loss per share.
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- --------------------------------------------------------------------------
For the Six Months
Ended June 30, 1996
--------------------
(UNAUDITED)
<S> <C>
Fixed Charges:
Consolidated interest cost and debt expense $ 40
Interest cost and debt expense of real estate
operations held for sale 4
Interest allocable to rental expense(b) 15
----
Total $ 59
====
Earnings:
Consolidated loss from continuing operations
before credit for income taxes and cumulative
effect of change in accounting principle $(81)
Proportionate share of provision for income
taxes of 50 percent owned but not controlled
affiliated companies 3
Equity in income of less than 50 percent owned
affiliated companies (7)
Dividends received from less than 50 percent
owned affiliated companies 3
Fixed charges 59
Interest capitalized (1)
Amortization of previously capitalized interest 4
----
Total $(20)
====
Ratio of Earnings to Fixed Charges N/A(c)
====
</TABLE>
- ----------------
(a) The consolidated financial statements of Sun Company, Inc. and
subsidiaries for the above period contain the accounts of all
subsidiaries that are controlled (generally more than 50 percent owned)
except those engaged in real estate and international production
operations. Real estate operations are accounted for as an investment
held for sale and included in the computation of the ratio of earnings
to fixed charges, while international production operations are being
treated as a discontinued operation and excluded from the computation.
(See Notes 2 and 3 to the condensed consolidated financial statements.)
Affiliated companies over which the Company has the ability to exercise
significant influence but that are not controlled (generally 20 to 50
percent owned) are accounted for by the equity method.
(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.
(c) Earnings are inadequate to cover fixed charges by $79 million.
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 64
<SECURITIES> 0
<RECEIVABLES> 810
<ALLOWANCES> 19
<INVENTORY> 465
<CURRENT-ASSETS> 1,611
<PP&E> 5,695
<DEPRECIATION> 2,737
<TOTAL-ASSETS> 5,010
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<BONDS> 886
<COMMON> 130
0
750
<OTHER-SE> 751
<TOTAL-LIABILITY-AND-EQUITY> 5,010
<SALES> 5,346
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<CGS> 4,083
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<OTHER-EXPENSES> 1,327
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<INCOME-PRETAX> (81)
<INCOME-TAX> (35)
<INCOME-CONTINUING> (46)
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<EXTRAORDINARY> 0
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<NET-INCOME> (8)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
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